China’s slowing economy is hurting large and small businesses alike but its red-hot stock market offers some comfort.
The sense of relief and the chance to recover keep Dong Jun going.
Dong closed his electrical equipment factory earlier this year and spends his time trading stocks.
“I want to make some money from the stock market and use the profits to restart my manufacturing business later when the economy improves,” he tells the Wall Street Journal.
Chinese manufacturers reported a 2.6 increase in profits in April from a year earlier, but nearly all of that increase came from securities investment, according to the latest official data cited by WSJ.
During that period, the value of stocks, bonds and other tradable securities owned by listed Chinese companies rose by 946 billion yuan (US$152.4 billion), up 60 percent, WSJ says, citing China economist Zhu Chaoping of UOB Kay Hian Holdings Ltd., a Singapore-based investment bank.
The recent market rally, which started late last year, was partly triggered by credit easing by the Chinese central bank.
This includes three interest-rate cuts since November. The looser credit policy has bolstered investor expectations for further efforts to spur growth.
Shanghai’s benchmark index is up 51 percent this year and 134 percent in the past 12 months while the smaller and more volatile Shenzhen exchange has gained 109 percent and 173 percent, respectively.
By comparison, state-owned enterprises, the backbone of the economy, have seen profits shrink 24.7 percent in the first four months from a year earlier.
Earnings in the private sector rose 6.1 percent, down from more than 10 percent.
But Dong says loans for private businesses like his are still “impossible” to get.
He has spent five million yuan to buy stocks and covered some of that amount with borrowed money.
“Hopefully, I can reopen my plant soon since my main interest is still in manufacturing,” he says.
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