An earlier installation of $19.9 billion worth of stimulus into Chinese equities failed to change negative sentiment after the first session of 2016 saw a 7% decline in stock prices and a halted market. Upon opening today, another drop of the same magnitude happened after only 29 minutes into trading, halting the market once more as Chinese officials devalued the yuan for the eighth day in a row in order to help exports. The lowest valuation of the yuan since 2011 is affecting peer currencies heavily, with the widely sweeping value alterations meant to combat a softening Chinese economy that is having serious trouble evolving from manufacturing to services centric. However, late results in both camps have manufacturing and services contracting slightly going into 2016, as Chinese equities pull down those of other economies significantly. The US, for example, echoed the declines Chinese stocks with its own indices sliding -1.10% earlier alongside European stocks. Chinese raw-material staples, particularly commodities like copper, are also on the retreat.
The temporary solution imposed during the similar event last summer by the China Securities Regulation Commission was to ban, for certain traders, the selling of equities. These measures help to keep capital from fleeing while preventing sudden precipitous drops in benchmarks, but do nothing to calm growing negative sentiment. Confidence in the government and finance industry is just not there, as the CSRC meets to discuss the path out of the storm. Emerging economies like Brazil and China are likely to drag on global results in 2016, say World Bank officials. The Bank has already lowered projections on 2016 world growth from 3.30% to 2.90%, not a high climb from what looks to be 2.40% in 2015 with China’s forecast also cut from 7.00% to 6.70%. The circumstances bring similar memories from 2008 to some investors, many of whom believe another global crisis is waiting in the wings.