Jake's View | Why China should just let the stock market crash

The mainland’s securities regulator is likely to make it harder for major shareholders to sell stocks on the secondary market, as the authority seeks to avoid another punishing sell-off following sharp declines on Monday that triggered a circuit-breaker trading suspension.

SCMP, January 6

It’s time again for a tale of two cities although, in fact, I don’t have to tell the tale. The two charts below tell it all for you.

Newspapers are in words business, however, and the boss won’t like it if I don’t put in some words, too. Thus:

The blue line in the first chart shows the growth of the mainland economy on an index basis where January 2000 equals 100. The red line shows you the performance of the Shanghai Composite Index on the same basis.

Here we have a stock market that shows no relation to the economy of the country in which it is located. They could be on two different planets. The economy booms mightily but the stock market just shuffles up and down a little with the occasional speculative rally and then falls back to where it was before.