Weak stocks could mean more crises
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The Chinese Yuan has risen nearly 20 percent against Euro due to the European debt crisis, which is a disadvantage for Chinese exports.
A new round of RMB exchange rate reform has allowed the Yuan to appreciate against other currencies, including the US dollar, the Euro, the Australia dollar and the Canadian dollar, which will surely deal another heavy blow to Chinese exports.
Above analyses show that the main cause for the tumbling US and China stocks is that people are worried that the global economy is still fragile.
China's economy is doing better than many other economies, so why are the stocks doing so badly? This is because there are many loopholes and problems in the management of China's stock market, including a low threshold, which allows too many initial public listings (IPO), refunding and a lack of a strict delisting method.
The U.S. has a sound readjustment mechanism and resilient institutions. Though it has many economic problems, it could quickly fix them. Actually the global financial crisis has not done much harm to the US economy, and its high-tech industries have hardly been affected.
But it is a totally different story for China. Many measures taken to deal with the financial crisis have become a restraint on economic growth. In addition, the bad performance of China's stock market is not only a result of the economic factors but also of some man-made factors. It's time to find the root causes and to take quick countermeasures.
For average investors, in order to protect the safety of their assets, they'd better not take big risks, even if that means earning next to nothing for a little while.
(This article was translated by Zhang Ming'ai.)
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