WILL THEY OR WON'T THEY? The debate among China watchers as the second quarter got under way was whether policymakers would take any further steps to prick an inflationary bubble emerging in the economy by raising interest rates.
As it turned out, the government did make a move. But not on rates. Instead, bank reserve ratios were raised. Forewarned by the strike at credit-growth, markets then caught the jitters as the key policymaking speech by Premier Wen Jiabao at the fifth session of the 10th National People's Congress (NPC) loomed.
The result? An 8.8 per cent collapse by the Shanghai Composite Index on February 27 - the largest one-day fall in a decade - and a mass exodus that saw trading in 840 companies frozen as they slid below their 10 per cent daily trading downside limits.
The mauling taken by the China market duly triggered a global stampede out of equities as investors overreacted to fears that the mainland's economic engine was spluttering.
Not quite as it turned out. But investors who cut and run ahead of the March 5 NPC address proved remarkably prescient when Premier Wen announced that China planned to gear economic growth down from an inflationary 10.7 per cent in 2006, to 'just' 8 per cent. After digesting the fact that an 8per cent growth rate would mean little more than a hiccup in demand, however, the China market along with the major markets around the globe, began clawing back those losses.
From its low of 2,771.79 on February 27, the Shanghai Composite Index has been steadily gaining back ground by the time this edition of Net Worth went to print. Helping restore confidence were some reassuring views from analysts.
