08/25/2009, 00.00
CHINA
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Fears for China's economy: the stock market drops 2.6%

By mid-afternoon, the Shanghai market was down 5.5%, partially recovering before closing. Premier Wen Jiabao ensures that the easy credit will continue, but the economy is far from healed. Just the loans raised fears of speculative bubbles.

Hong Kong (AsiaNews / Agencies) - After days of recovery from the last crash, the stock market in China closed in the negative. Shanghai has closed at minus 2.6%, after declining in mid-afternoon to minus 5.5%. That of Shenzhen has closed at minus 2.3%.

Analysts attribute the results to the ambiguous comments Wen Jiabao made yesterday in which he promised easy credit to support the economy, but at the same time he warned against "blind optimism”.

During a trip to Zhejiang province, Wen said the Chinese economy shows positive signs, but the situation remains fragile. "There are - he said - many unstable and uncertain factors and the economic situation is still very serious, although the global and national economy are changing in a positive way."

To address the crisis, Beijing has launched an aid package of up to 4 trillion yuan (about 410 billion Euros) to support domestic consumption and put money into circulation through massive investments in infrastructure and public works.

But experts point out that the huge amount of loans distributed to date is likely to have created a bubble and discuss the possible impact on banks and the economy.

The flow of liquidity due to the aid package has boosted the value of Shanghai stock market to almost double, from January to August 4, 2009, after it had decreased in 2008 by 65%. But in the first two weeks of August Shanghai fell by 19.8%. In recent days, it had recovered more than 5%, only to drop into the red once again today.

 
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