so the Chinese government is learning to be capitalist...

[Jim Devine <jdevine03@xxxxxxxxx>]

June 15, 2005
China Is Said to Consider $15 Billion Bailout of Stock Market
By DAVID BARBOZA

SHANGHAI, June 14 - The Chinese government is considering creating a
$15 billion fund to help bail out the nation's ailing stock market,
according to a senior government official and people told of the
proposal.

The creation of a huge fund to invest in mainland stocks would be the
government's most striking effort yet to prop up share prices and try
to restore confidence in a market that has fallen to its lowest level
in about eight years.

The proposal comes at a time when China's economy is sizzling hot, but
the nation's Communist Party leadership is struggling to fix a stock
market that has been broken for several years.

The Shanghai and Shenzhen stock exchanges, where about 1,400
state-owned companies are listed, are each down 40 to 50 percent from
the highs they reached in 2001. In recent months, struggling brokerage
houses and large investors have been aggressively lobbying for a
government bailout fund.

Government bailouts have a weak track record, however, and the
proposed support is unlikely to nurse the growth of the capital
markets here. When authorities in Hong Kong and Tokyo stepped in to
aid their local stock markets, the moves only provided a short
psychological lift and failed to produce a sustained turnaround.

Analysts say the government is considering the huge bailout proposal
because the market has fallen so sharply in the last year that some
government officials fear a bigger drop could seriously impede the
long term development of China's financial markets.

Indeed, China's weak system for raising money and putting it to
profitable use is not just hurting investors and state-owned
companies, experts say. At the heart of the problem is that private
companies, which have a much better track record, are not allowed to
list on the Chinese stock exchanges.

"China needs a healthy capital market," said Zhou Chunsheng, a
professor of finance at Guanghua School of Management at Beijing
University. "Traditionally state-owned companies found it easy to get
financing from state-owned banks. But now we have more small
businesses and private businesses. And they have to find ways to get
financing."

Some Chinese officials say they are motivated in part from fears that
huge and mounting investor losses could also create social discontent
among the millions of people who began buying shares in the early to
mid-1990's, when stock prices were climbing.

While it is not clear whether China's leadership will ultimately
approve the bailout proposal, expectations that the government is
about to act helped lift share prices last week in one of the biggest
one-day rallies in three years. ...

http://www.nytimes.com/2005/06/15/business/worldbusiness/15yuan.html?ex=1119499200&en=9848ea7be6c36ad4&ei=5070&emc=eta1

-- 
Jim Devine
"Segui il tuo corso, e lascia dir le genti." (Go your own way and let
people talk.) -- Karl, paraphrasing Dante.