Saving China's Stock Market

40 Pages Posted: 13 Aug 2016

See all articles by Yi Huang

Yi Huang

Graduate Institute of International and Development Studies

Jianjun Miao

Boston University - Department of Economics

Pengfei Wang

HKUST, Department of Economics; Hong Kong University of Science & Technology (HKUST) - Department of Economics

Date Written: August 11, 2016

Abstract

What were the economic benefits and costs of preventing a stock market meltdown during the summer of 2015 by the Chinese government intervention? We answer this question by estimating the value creation for the stocks purchased by the government between the period starting with the market crash in mid-June and the market recovery in September. We find that the government intervention increased the value of the rescued firms with a net benefit between RMB 5,697 and 6,635 billion, which is about 10% of the Chinese GDP in 2014. The value creation came from the increased stock demand by the government, the reduced default probabilities, and the increased liquidity.

Keywords: China, Stock Market Crash, Government intervention

JEL Classification: G14, G15, G18

Suggested Citation

Huang, Yi and Miao, Jianjun and Wang, Pengfei, Saving China's Stock Market (August 11, 2016). Available at SSRN: https://ssrn.com/abstract=2821664 or http://dx.doi.org/10.2139/ssrn.2821664

Yi Huang

Graduate Institute of International and Development Studies ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Jianjun Miao (Contact Author)

Boston University - Department of Economics ( email )

270 Bay State Road
Boston, MA 02215
United States
617-353-6675 (Phone)

HOME PAGE: http://people.bu.edu/miaoj

Pengfei Wang

HKUST, Department of Economics ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Clear Water Bay
Kowloon, Hong Kong
China

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