CHINA DAILY COMMENT 9 TUESDAY MARCH 6, 2007 THE NATIONAL ENGLISH LANGUAGE NEWSPAPER Last Tuesday sell-off not Beijing Hong Kong Washington, DC A MEMBER OF 15 Huixin Dongjie, Rm 1818, Hing Wai Centre PMB 223 4401-A Chaoyang District 7 Tin Wan Praya Road Connecticut Ave. NW, Black Tuesday Beijing 100029 P.R. China Aberdeen, Hong Kong Washington, DC 20008-2322 Tel: (86-10) 6499-5000 Tel: (852) 2518-5111 Tel: 1-202-558-6517

Wen’s new priorities HONG LIANG y and large, Premier rein in runaway real estate prices he Shanghai stock market’s Wen Jiabao’s report on and to offer affordable education nearly 9 percent plunge last government work is and medical services remind us TTuesday has been taken by many a sensible one to get of the necessity of systematic investors and analysts as the shrill- things done, a style solutions. est warning so far of an overheating Bin keeping with his and his Structured around such chal- market that has been sucking in comrades’ images as pragmatic lenges, the task-centered report copious amounts of funds from lofty troubleshooters. Wen delivered was tailored to solv- institutions as well as savings from We have little doubt about high ing these major societal problems. the average person-on-the-street. approval ratings for Wen’s report, The vows to regulate the chaotic But savvy pundits argue against in the National People’s Congress, housing market and to “build a reading too much into such occasional at the parallel annual session of basic healthcare system that cov- sharp corrections, which they maintain the Chinese People’s Political ers urban and rural residents” are common for the stock market of a rapidly growing economy as large as Consultative Conference, and on may sound too distant from the that of China. In a statement released the street. present. But they are a prescrip- Fu Hongge the day after the fall, analysts at Union The Wen Cabinet has proved tion of hope that responds to soci- Bank of Switzerland (UBS) dismissed faithful to the promises made in ety’s imperative needs. It gives us the sell-off as “nothing signifi cant.” its report last year. Not everything a sense of direction. Indeed, the Chinese stock market has been done well enough, as Wen If such policies intended for has since stabilized, with the leading himself acknowledged yesterday. mid- and long-term changes are indices moving within a much less But from the day-to-day operation not what the average citizen most volatile band. So it seems that the big of the central government, we are wants, Wen’s report also contained China’s stock market sell-off was triggered by nothing more convinced that the leaders have measures promising immediate than the knee-jerk reaction of many tried hard. benefi ts. skittish investors after the indices hit This year’s report is more spe- The proposal to establish State a record high the day before. cifi c than past ones on the chal- scholarships and stipends begin- It may seem hard to believe that lenges we face, as well as problems ning the next school year in four- no world market shaker billions of dollars of wealth, on paper at least, can be wiped out overnight in government performance. year colleges, as well as advanced By Yi Xianrong CHINA There are many similarities and secondary vocational schools, the market is a natural option. If we by the often irrational herd instinct in the sections on challenges in is an admirable move to ensure all FORUM approach the events on the interna- of investors. But coming from Hong tional fi nancial market from this per- Kong, I have seen that happen often. this and last year’s reports. Wen students entitled to higher educa- ust a week ago, the Chinese stock In the context of fi nancial globaliza- spective, the drop of A-share prices There is nothing scary about these repeated the list of conundrums tion do not drop out of school be- markets plummeted. The Shanghai tion, economic tumult in any small actually had insignifi cant infl uence occasional stampedes as long as the that pester the central govern- cause of economic diffi culties. composite index plunged nearly 9 country could greatly impact the on global stock market fl uctuations. economic fundamentals and the ment and the general public — an The decision to offer free in- J percent and the Shenzhen index global fi nancial market, much more The plummeting of the US stock investment climate remain stable, awkwardly structured economy, struction for students at teachers’ dropped 8.5 percent. This was followed so with economic events in such a big market on February 27 should not be as they are in China. The economy a wasteful and polluting model of colleges is guaranteed to restore by drops in markets globally. economic player as China. blamed on Chinese factors. Instead, is growing at a brisk pace without growth, poor public services, as and add to the appeal of such In Asia, the Singapore index wound Moreover, information is now the stock market drop was an expres- causing much infl ationary pressure. well as ineffi ciency and corrup- schools. That will in turn upgrade down 2.29 percent and the Nikkei in transmitted through the Internet and sion of poor economic indicators in To be sure, there is overheating in tion in government offi ces. both the popularity of teaching as Tokyo slid by 0.5 percent. telecommunications so rapidly that the United States. certain sectors of the economy, par- These issues’ continued promi- a profession and the qualifi cations In Europe, the British FT index the shifts and changes in the fi nancial For example, orders for durable ticularly property. But the authorities nence on the government’s list of of our teachers. plummeted by 2.2 percent, Germa- market of one country are known virtu- goods in January dropped by 7.8 have taken measured steps to rein in priorities indicates their complexi- With such fi ne ideas, what we ny’s Dax dropped 2 percent and Cac ally instantly around the world. percent, much more than expected, bank credit that could be used to feed ty. The limited effectiveness of last need next is a shared political will in France went down by 2.6 percent. More important, the world’s major according to statistics released by the an investment bubble. year’s departmental endeavors to to bring them into reality. In the United States, the New York investment banks have extended their US Commerce Department. The stock market rally in the past Stock Exchange saw the steepest drop tentacles to all corners of the global Also, Alan Greenspan, former 12 months or so was partly a refl ec- since the September 11, 2001 terror fi nancial market. As a result, informa- chairman of the Federal Reserve, tion of the economic boom. With the attacks. The NASDAQ, Dow Jones and tion about any insignifi cant changes warned that the US economy could Shanghai stock index surging more Standard & Poors all plunged more in a local fi nancial market is instantly be caught in stagnation by the end of than 130 percent in that period, de- Paying for the priorities than 3 percent. transmitted worldwide through the this year. Under such circumstances, spite occasional faltering, it is natural Latin American and African stock channels of these giant players. international speculators are happy to to question whether the Chinese stock remier Wen Jiabao vowed A hefty educational investment markets were not spared. Most important, these giants are use this information to make sure that market is over-valued. yesterday to enable plan has been announced. A total Many analysts attributed the manipulating the fi nancial markets the strong US stock market slides. both rural and urban of 85.85 billion yuan ($11 billion) worldwide shocks to the Chinese throughout the world in one way or residents, particularly will be allocated from the central stock market’s infl uence on the in- another. n addition, stock prices on the the poor, to enjoy the budget this year, an increase of 41.7 ternational market. Some believe the Under such circumstances, infor- markets of many countries and Psunshine of public fi nance. percent over the previous year. Shanghai stock market slump sent mation about any economic event in Iregions have been rising over the This heartening remark re- A proposal to double the central shock waves to the world stock mar- a local fi nancial market is bound to be last year. Take Hong Kong. The Hang fl ected a signifi cant shift in the government’s subsidy for the rural kets, a harbinger of dramatic fi nan- spread worldwide instantly. Seng Index rose 5,000 points in 2006, Chinese government’s budget cooperative medical care system cial changes. Others argue that the Today’s international financial or 30 percent, over the previous year. priorities from economic growth has been put forward. February 27 “Black Tuesday” marked market is guided by these fi nancial With these factors, readjustment could toward the welfare of the people. The establishment this year of the beginning of China’s becoming a heavyweights in virtually every happen any moment. So, it was not so After years of fast economic a national basic minimum cost of world monetary center. way, ranging from investment ideas much that the plummeting of Chinese expansion, China has become living allowance has been prom- As a matter of fact, the sharp one- and investment tools to investment mainland stocks caused the drop of day decline in China’s stock market modes and channels. Investors’ prof- the Hong Kong stock market as that financially better prepared to ised for rural residents. was purely an accidental event, in iting from stock values declining Hong Kong made a downward readjust- promote faster progress in social All these social causes are of the opinion of this author. Even if or rising by short selling and going ment itself, merely making use of the This was apparently the question programs. great and far-reaching signifi- this kind of incident happens again, long on the international market are changes in the mainland markets. many investors were asking when With a fi rm grasp of the burn- cance in promoting social fair- it does not support the argument all infl uenced by their actions. We should treat the fl uctuations on they dumped their holdings last ing problems that are of greatest ness and building a harmonious that the Chinese stock market holds the global stock markets, seemingly Tuesday after the index broke through concern to the people, the Chinese society. Though the fi scal support a major place among world markets. or example, when these major triggered by the slump of A shares, the previous day’s 3,000 point psycho- authorities are now delivering the the central government currently China’s present economic strength players went long on bulk goods not as something shocking. It is quite logical barrier. Some analysts tried to long-awaited changes through a provides may not be enough to and the ranking of its stock market Fa few years ago, the prices of normal for prices to fl uctuate. fi nd the answer by drawing a paral- budget that ensures that all peo- fi x these problems any time soon, indicate that the country is far from bulk goods kept rising. When they We should not overestimate the lel with other markets, particularly ple share the fruits of reform and the new budget priorities point to being a world fi nancial center. went long on petroleum, rounds of Chinese A-share market’s infl uence Hong Kong, where some of the largest development. strengthened and sustained public However, I believe that the impact oil price hikes were touched off. They on the global market. mainland enterprises are listed. They China’s policymakers have fi nancing for social programs. of the Chinese mainland yuan-de- reaped fat profi ts from both selling noted that the average earnings mul- attached increasing importance An improved social security nominated A shares on the global short and going long. The author is a researcher with the tiple of the mainland stock market, at to addressing the underdevelop- network for all can help narrow stock markets is a manifestation of In view of this, taking advantage Institute of Finance and Banking at the around 40 times, was substantially ment of various social causes in the widening wealth disparity fi nancial globalization. of any chance to create shocks across Chinese Academy of Social Sciences higher than that of Hong Kong. recent years. But the government between urban and rural areas. But such a disparity does not neces- work report Premier Wen deliv- It can also enable the people sarily mean that the mainland market is over-valued because the mainland ered yesterday distinguishes to loosen their purse strings. In- economy is growing at more than dou- itself from its predecessors creased domestic consumption is ble the pace of Hong Kong. “Of course with unprecedented stress on a precondition for the country to Get over China-threat syndrome valuations (of mainland stocks) are education, healthcare and other reduce its dependence on export- already high, but not stratospheric by crucial social programs. led growth. By Feng Zhaokui than Japan in some respects. Some cians strive to strengthen the alli- Chinese standards,” the UBS analysis Japanese are thus thrown off balance ance with the superior United States noted. psychologically. They suffer mental so that China could be forever kept in It is generally accepted that Shoichi Nakagawa, policy chief of Ja- tortures and they need to readjust an inferior position. the growth rates for the Chinese A safe big bang pan’s ruling Liberal Democratic Party, their assessment of China. To prevent China from leaping over economy and corporate earnings in said in Nagoya on February 26 that Ja- This kind of psychological disloca- Japan in the international hierarchi- 2007 will equal, or exceed, those in pring Festival celebra- city with fewer reports of deaths, pan could be subject to China’s strong tion constitutes the foundation of the cal echelon, the administration of 2006. Based on such projections, the tions ended with a bang injuries and fi res caused by fi re- infl uence in the context of China’s “ris- “China threat” theory subscribed to former Prime Minister Junichiro prospective multiples of the leading on Sunday. crackers this year, the second year ing military spending”. He went on to by many Japanese. Koizumi put the strategy of adher- mainland stocks may look downright The grand fireworks since the ban was lifted. Beijing say: “If something goes awry in Taiwan This response to China’s “rise” ence to the United States at the very tempting. displays Sunday night banned fi recrackers in 1993. in the next 15 years, then within 20 has its roots in the unique Japanese top of its agenda, doing Washington’s Here on the mainland, as in most was in observance of the Lantern Thundering applause should years, Japan might become just another psychology. bidding on many important matters in other markets, investors’ sentiment SYuanxiao one of China’s provinces.” First, the Japanese have a strong economic as well as military fi elds. can be swayed by expectations of or Festival, the 15th be given to the local authorities. Nakagawa’s trumpeting of the sense of crisis, which leads to excessive While following the US closely in the government fi scal and monetary day of the fi rst month of the lunar Once the green light was given to “China threat” sounds extremely bi- worry over China’s development. virtually everything, Koizumi em- policies. The government is widely calendar. fi reworks displays, the municipal Yuan xiao ased. However, his strong suspicions Second, the sense of hierarchy still phasized “self respect and dignity” in known to have been keeping a close means first, while government had handled the activ- over the growth of China’s military exists in some Japanese minds. This dealing with issues left over by history watch on the fl ow of funds into the means night. With the two char- ity appropriately. strength is representative of the opin- means that some Japanese are not psy- such as Japanese leaders’ paying hom- stock market since the rally took off in acters combined, the word refers Notices on when and where ions of Japan’s political elites. Worse, chologically prepared to get along with age at the Yasukuni Shrine. earnest many months ago. But there to the fi rst time that the full moon residents could light fi recrackers his remarks could fan the Japanese other countries on an equal basis. China badly needs stability in its seems to be no compelling reason at is seen in the new Chinese year. were issued. Police and fi remen public’s misgivings about the “rise” In the 1980s, when China trailed near abroad now that it is committed this time for the authorities to seri- That a combination of fog, rain were on duty around the clock for of China. far behind Japan, Japan condescend- to bringing about a moderately pros- ously tighten liquidity. and snow on Sunday did not pre- the past 15 days, on the alert for Liu Jinqing, the late honorary ingly offered Offi cial Development perous society. China has no inten- However, the potentially devastating vent the full moon from appearing safety problems. professor of Tokyo Keizai University, Assistance to the “inferior” China. tion of confronting the United States, force of investors’ heard mentality, as was believed to be a good sign. Part of the concern for safety, once observed: “The Japanese are psy- But with China’s economic take-off, challenging the US-Japan alliance or demonstrated so vividly last Tuesday, Similar to the Mid-Autumn yesterday Beijingers turned in chologically tormented. They looked some Japanese feel ill at ease. elbowing the US out of Asia, much less cannot be easily ignored. Festival that falls on the 15th unused fi reworks to their neighbor- down upon the Chinese in the past. Third, some Japanese are subject invading and annexing Japan. The Wall Street Crash of 1929, day of the eighth month of the hood committees in return for gifts They have considered themselves as to the sway of a near-abroad complex. As some American researchers “Black Tuesday” as it has come to lunar calendar, this celebration such as a downy golden pigs. No 1 in Asia since the Meiji Restoration. They harbor misgivings about the have remarked, China has drawn les- be known, also serves as a reminder is considered an evening for fam- Traditionally, fi recrackers are They did wrong in the fi rst half of the development of China, which used to sons from the tragedies of the rise of that there is an urgent need to step up ily gatherings. One of the main believed to chase away demons, 20th century. They made impressive be one of the centers of ancient civi- Japan and Germany in the late 19th and efforts in establishing the proposed advances in the latter half of the 20th lization. China has a population 10 early 20th centuries. China has become fi nancial futures market. courses on the dinner menu is especially on Lunar New Year’s century, taking advantage of the Cold times that of Japan and territories 25 ironclad in its determination to take the sweet dumplings. Their roundness Eve. War, and were far ahead of China. fold that of the Japanese archipelago. road of peaceful development. E-mail: [email protected] is considered in harmony with the Since we would not want to ban China, however, has made spec- They are worried that Japan could be night’s full moon. this centuries-old national tradi- tacular progress since the reform marginalized in East Asia. The author is a researcher with the To comment, e-mail The end of the Chinese New tion, we are learning to live with and opening-up were started in the Driven by the combination of all Institute of Japanese Studies at the [email protected] Year celebrations fell in the capital it safely. late 1970s and is now doing better these factors, some Japanese politi- Chinese Academy of Social Sciences