Walter Hutchens’ Blog

China’s stock markets rose steeply on Tuesday after Premier Wen Jiabao said three sentences about China’s securities markets in a meeting of the standing committee of the State Council. PRC press stories about Wen’s comments are here and here.

Wen said China should implement the State Council’s 9 Articles (a policy paper on China’s securities markets), protect the interest of the masses of investors, and promoted the stable, healthy development of capital markets. China’s leaders do not often comment on the stock market, and apparently traders took it as a good sign. Rumors that some market-favorable policies (such as another reduction in stamp taxes and maybe class voting for listed companies) will be promulgated soon also helped bolster the rally.

Attention to China’s stock markets from the highest levels of PRC government is probably a good thing, but I don’t know what Wen can do to solve the fundamental problems of China’s markets without causing pain to the status quo. Conversely, if policies are adopted that will boost the status quo, I fear those actions may not be in the best interest of fundamental reform.