Officials in China have stopped intervening in the country’s incredibly fragile stock market. Policy makers are now engaged in a debate over whether or not government attempts to stock the crash are actually doing any good.
Some officials in China believe plummeting stock prices will have little effect on the country’s economy and that the costs of supporting those failing companies is too high. Other officials believe tumbling shares pose a direct risk to Chinese banks.
Over the past two days, the Shanghai Composite Index fell by 15 percent. Losses on the index now total more than $4.5 trillion since mid-June.
“Government intervention has dropped substantially,” Michelle Leung, the chief executive officer at Xingtai Capital in Hong Kong, told Bloomberg News on Tuesday. “The reform-minded camp within the government that favors letting the market do its work seems to be driving decision making right now.”
It was only in November 2013 that officials in China said they would allow the markets to play a decisive role in economic growth and stability. Last month more than 1,400 companies were allowed to halt trading.
For now the Chinese government may be hands-off but with a weakened economy, a strong US dollar, and all attempts failing to calm China’s stock market, the country’s officials may find themselves scrambling for a quick fix yet again in the near future.