China's Stock-Market Rout Is Almost Over, Says PBOC Governor

Monday 7th September 2015

September 6, 2015

Yuan exchange rate against dollar is stabilizing, Zhou says.

State intervention helped avoid systemic risk, Zhou says.

The rout in Chinese stocks is close to ending and the nation’s financial markets are expected to become more stable, according to the head of the country’s central bank.

State intervention in the equity market prevented systemic risk and stopped the free-fall in shares, People’s Bank of China Governor Zhou Xiaochuan said in a statement on the bank’s website Saturday. The yuan’s exchange rate versus the dollar is also close to stabilizing, he said, after a meeting by finance ministers and central bankers from the Group of 20 nations in Ankara.

The Shanghai Composite Index tumbled 39 percent since reaching a seven-year high on June 12, helping to erase $5 trillion in value on mainland bourses, as traders cut leveraged bets. Margin loans tracked by Chinese exchanges have fallen by more than half from their peak to about 1 trillion yuan ($159 billion). The shock devaluation of the yuan in August rattled world markets and sparked exchange-rate declines in emerging economies.

The leverage ratio has clearly dropped and the impact on the real economy is limited, Zhou said. He said there is no basis for long-term yuan depreciation and the government’s determination to deepen market reforms hasn’t changed, while economic fundamentals are substantially unchanged.

Volatility in China’s stock markets is nearing its end, Zhu Jun, director-general in the People’s Bank of China’s international department, also said in an interview on Saturday in Ankara, after G20 finance chiefs flagged concerns about potential global spillovers.

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