Stock market rout another blow to fading 'Chinese Dream'

Mon Jul 13, 2015 5:20pm EDT
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By John Ruwitch and Brenda Goh

CHANGZHOU/WENZHOU, China (Reuters) - About a week after Shanghai's main stock index broke above 4,000 points in April, the leading newspaper of China's ruling Communist Party weighed in with patriotic glee.

Not only was the bull run just beginning, said a widely-read, and later ridiculed, editorial from the People's Daily.

In the longer term, it continued, the "Chinese Dream" of rising prosperity and security championed by President Xi Jinping would be reflected in capital markets, creating "huge" investment opportunities.

The stock market turmoil in the last month has shattered that particular dream for many small-time players, though the risk of contagion from a relatively narrow class of retail investors who dominate Chinese equities appears small for now.

Beijing had earlier stepped in to address the property boom and mounting bad debts, two potential danger zones in the economy, helping to bring down house prices and shift local government debt to longer term maturities to avert a crisis.

Now it must find ways to change economic gear from massive stimulus to consumer-led growth, and the slump in stocks has not helped.

Zhou Sujuan, a 44-year-old manager at a private medical device company in Wenzhou, a coastal city 450 km (280 miles) south of Shanghai known for its entrepreneurial spirit, lost 2 million yuan ($322,186) in the selloff.

"This has caused me a lot of heartache. It will take some time to recover," she said.   Continued...

Workers make metal parts at a factory of the Changzhou Wujin Zhengda Vehicle Industry Co. Ltd in Changzhou, Jiangsu province, China, July 9, 2015. REUTERS/John Ruwitch