Market volatility will be part of ‘new normal’, say Chinese top regulators
The world should get used to volatile markets in China, one of the country’s top regulators said Wednesday.
Market volatility will be part of the “new normal” as China continues to transition from an economy based on investment and exports to one driven by consumption, said Fang Xinghai, the vice chairman of the China Securities Regulatory Commission.
“Get used to it,” he told CNN during an interview at the annual World Economic Forum in Davos, Switzerland.
His comments follow wild swings on Chinese stock markets that have sent shock waves around the world.
The Shanghai Composite index has fallen by 16% since the start of January, spooking investors and triggering sharp drops in other global markets. Shanghai is down more than 40% since a bubble burst last summer.
Fang said Chinese markets are more volatile than other developed exchanges because they are dominated by individuals who lack the experience of large institutional investment houses.
Chinese regulators introduced a circuit breaker mechanism at the start of 2016 to try to protect small investors from big market swings. But instead of offering protection, it fueled a sense of panic and had to be withdrawn.
Fang told CNN that having a circuit breaker was “not an appropriate policy for China,” though it has worked effectively elsewhere.
