China's recent stock market crash, wiping out about three trillion dollars in capital, could play havoc with the Chinese government's economic reforms and dash hopes of stock markets being effective fundraising channel to encourage start-ups, experts have said.
The crash has been a bitter pill for the real economy, and will be a huge comedown for policymakers if they are forced to revisit Premier Li Keqiang's "new normal" growth plan for slower, healthier economic development, Hong-Kong based South China Morning Post quoted experts as saying.
Li raised the profile of the capital markets after he took the helm of the world's second-largest economy in 2013, encouraging technological start-ups to net much-needed growth funds on the stock exchanges and the over-the-counter markets.
"The market crash could dash the government's hopes for the stock market being an effective fundraising channel. The worst is yet to come and it's nearly certain the collapse will hijack the originally planned policymaking," Wang Feng, chairman of Shanghai-based private equity group Yinshu Capita told the Post.
Since June 12, the benchmark Shanghai Composite Index has plunged 29 per cent, sparking a crisis of confidence among investors who now believe the downward spiral will last some time.
The dramatic fall, that has wiped out nearly USD three trillion in market capitalisation since June 12, sent a warning to China's economy that has already faced downward pressure such as sluggish external demand and weak investments, state-run Global Times reported.
The slump prompted China's securities watchdog to order probe into the market manipulation activities of Chinese stock and futures trading.
