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Saving China's Stock Market

Yi Huang (), Jianjun Miao () and Pengfei Wang ()
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Yi Huang: IHEID, The Graduate Institute of International and Development Studies, Geneva

No 09-2016, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

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 (search for similar items in EconPapers)
JEL-codes: G14 G15 G18 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-08
New Economics Papers: this item is included in nep-cna and nep-tra
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Journal Article: Saving China’s Stock Market? (2019) Downloads
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