A market, by definition, is a place where buyers and sellers can come together to exchange goods and services. That involves buying and selling those goods. Once you eliminate that free trading, you no longer have a market.
Then there is China, where the authorities have suspended the sale of half of the A share stocks. “Investors with stakes exceeding 5 percent must maintain their positions,” the China Securities Regulatory Commission said.
Throughout history, rules and regulations have slowly evolved to markets. Indeed, a certain level of regulation is desirable to ensure fair dealings, transparency and efficiency. By removing the ability to freely sell shares, the Shanghai Stock Exchange no longer qualifies as a market. I don’t know what it is, but if forced to come up with a name, the pursuit of accuracy would suggest calling it a government bureaucracy.
Lest you forgot, China remains a centrally planned autocratic regime ruled by the Communist Party. Niceties such as liquidity and free trading are deviant concepts. Pity Xiao Gang, the chairman of head of China Securities Regulatory Commission. The Wall Street Journalsaid he had “the toughest job in China.”
Let me suggest to Xiao that he might learn from the mistakes the West made in its recent crises.
During the dotcom bubble, Federal Reserve Chairman Alan Greenspan failed to do anything to reduce the speculative excesses. Day trading, excessive leverage, mediocre listing requirements all worked to allow a huge bubble.
Continues here: China Shows How to Destroy a Market