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China's Economy Is Growing, So Why Are Markets Struggling?

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China's Economy Is Growing, So Why Are Markets Struggling?

This week, China released data showing that the nation's economic growth was steady at 7 percent in the second quarter, surprising analysts who were expecting the figures to be weaker.

China's National Bureau of Statistics spokesman Sheng Laiyun commented that the figures point to economic stabilization and that the data represented an objective view of the nation's current situation.

Markets Lower

So it may have come as a surprise to many that the Shanghai Composite Index began Wednesday on a low note and continued declining to finish the day 3 percent lower.

The market's disproportionate reaction to positive economic data underscored the growing mistrust between investors and Beijing.

Inflated Prices

In recent weeks, the Chinese government has enacted several measures in order to stem the market's rapid decline.

Trillions of yuan worth of investment loans helped inflate stock prices to unsustainable levels, and when that bubble popped regulators stepped in to keep prices from crashing further.

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Investor Mistrust

The measures included suspending many of the nation's listed companies from trading, something investors say made the market undesirable and untrustworthy.

Although Beijing has promised to reform its market in order to make it more attractive to foreign investors, the latest market problems have caused many to pull their money out of China claiming that the government intervention paints an uncertain picture of the future.

 

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