BEIJING (BLOOMBERG) - China should wind down its stock market support programme even if prices continue to fall, according to a commentary in a state-run official economic daily.
The front-page remarks in the Economic Information Daily sought on Tuesday (Aug 25) to reassure investors the Chinese economy wasn't "that bad" and argued that disasters like the Asian financial crisis or the sub-prime mortgage debacle wouldn't repeat. They came as stocks extended their steepest rout since 2007 on concern the government is paring back support for the market.
The writer, identified as Xu Gao, said the government has been addressing its problems with local government debt and the global economic situation wasn't as fragile as it was two decades ago.
"The global stock plunge was more likely caused by emotions rather than fundamentals," the commentary said in the paper owned by the official Xinhua News Agency. "It's not good for the recovery of the economy to bring back the focus of quantitative easing to the stock market."
The Shanghai Composite Index tumbled 3.9 per cent to 3,085.49 at 10:21 am local time, heading for the lowest close in eight months. The gauge plunged 8.5 per cent on Monday, following last week's 12 per cent decline.
In another sign the government could start to pull back from underpinning the market, Caixin reported the China Securities Regulatory Commission has displayed indifference to the latest stock plunge. That may be a sign of maturity in the way it supervises the market, Caixin said, citing an unidentified person close to the regulator.
The CSRC didn't order relevant departments to work overtime after Monday's declines as they did after other recent market drops, Caixin added.
Concern over the health of the Chinese economy has contributed to the most unsettled period in global markets since the financial crisis, with trillions of dollars wiped off the value of equities and commodities.
"We shouldn't lose confidence in the economic growth prospects of China and the globe," the Economic Information Daily commentary said.
Other state media also urged investors not to panic, with the China Securities Journal saying weakness in markets around the globe - including in the US - has affected Chinese shares. Investors should balance their positions and wait for the market to calm down, it said.