China's Economic Instability: Halloween Protests and Financial Woes Ring Alarm Bells
China's Halloween protests become a haunting reminder of the country's economic distress As borrowing costs for certain banks soar to record highs, young people take to the streets, dressed in costumes, to voice their concerns A chilling spectacle that underscores the warning signs flashing in the nation's richest city (345 characters)
Young people in China's wealthiest city took to the streets this week, utilizing Halloween parades as a platform to express their discontent regarding the nation's economic issues. These concerns were further highlighted by a significant increase in borrowing costs for certain banks. Don't forget to sign up for CNN's Meanwhile in China newsletter, providing insights into the country's progress and its global impact.
Numerous party-goers in Shanghai donned their most creative Halloween outfits to commemorate the Western celebration. Alongside the usual costumes like Batman and princesses, the crowd, as well as the Chinese online community, passionately embraced outfits that provided biting social criticism, focusing particularly on the current status of the world's second-largest economy.
Virally shared videos on social media showcased a man attired as the Shanghai Composite Index, symbolizing one of the year's poorest performing stock markets worldwide, while prominently holding a bundle of leeks.
China's population of over 220 million individual investors often express discontent, feeling like they are being taken advantage of by both large corporations and the government, similar to how leeks, a common ingredient in Chinese cuisine, are harvested.
A costume depicting a slump on China's stock market went viral on social media
Xiaohongshu
The unidentified young man, whose identity remained unknown to CNN, appeared to express his frustration over the continuous decline of the Shanghai Composite Index. In the past seven months, the index has plummeted by over 10%. The video quickly gained popularity on various social media platforms such as Weibo, Douyin, and Xiaohongshu.
One Weibo user commented, describing the cosplayer in the video as "the most terrifying."
"I can't bear to witness it. It devastates me," expressed another user. "This ghost is truly the embodiment of evil in China!"
Chinese shares have witnessed an unparalleled exodus of international investors in recent months. The Stock Connect platform has experienced a massive outflow of foreign funds, totaling $22.1 billion from August 7 to October 19. This marks the largest outflow in the history of the trading link connecting mainland markets and Hong Kong.
The Chinese economy has faced several obstacles that have weakened its growth. These challenges include a crisis in the property market, local government debt burdens, escalating tension between the US and China regarding technology, and subdued global demand. Despite the implementation of various measures by officials to stimulate markets and strengthen the economy, the impact has been limited.
A woman dressed up as a starving medical student.
Zhou You/VCG/Getty Images
At the Halloween parade, numerous party-goers expressed their frustration regarding the state of the economy. A peculiar sight was witnessed with a woman who had disguised herself as a medical student, clutching a begging bowl within her hands. Another individual, portraying a liberal arts student, brandished a sign requesting egg fried rice while also carrying a begging bowl.
A woman dressed up as a liberal arts student hungry for egg fried rice.
Costfoto/NurPhoto/Getty Images
The government has ceased publishing the unemployment data due to the severity of the issue among young individuals.
According to Xiao Pan, a participant of the celebrations in Shanghai, people have kept their emotions repressed for an extended period.
"So when they find such a window, they want to express their true selves," he said. "Halloween is an opportunity to express something without worrying about political risks."
Warning signs flashing
The Halloween festivities aligned with another worrisome development in China's economy.
Overnight borrowing costs for certain Chinese banks reached an unprecedented 50% on Tuesday, triggering memories of the credit crunch in 2013. During that period, short-term borrowing rates soared to 30%, causing anxiety in global markets.
Funding conditions have tightened due to government bond sales and impending tax payments at the end of the month, according to Yan Ziqi, chief fixed income analyst at Huaan Securities. This has led institutional investors to raise their short-term rates in order to avoid cash shortages.
Last week, China's legislature gave the green light to one trillion yuan ($137 billion) in sovereign bonds to finance the reconstruction endeavors following natural calamities and other infrastructure schemes. A portion of these bonds has already been issued, resulting in an augmented supply of government bonds in the market. Consequently, this can lead to a decrease in the circulating money.
While the majority of borrowers remained unaffected and overnight rates swiftly returned to their typical level of approximately 2.5%, the scarcity of cash indicated the apprehension among investors regarding potential risks in the Chinese financial system.
Official figures for October indicated another contraction in the country's significant manufacturing sector due to weak demand. Similarly, last month witnessed the lowest activity in the services and construction industries since China lifted its Covid-19 restrictions in December 2022.
"Chinas economic outlook remains highly uncertain," Moodys Investors Service said in a report on Thursday.
President Xi Jinping attends a session of the National People's Congress at the Great Hall of the People in Beijing on March 11, 2023.
Greg Baker/Pool/Reuters
President Xi Jinping recently hosted a crucial financial policy meeting to tackle the aforementioned challenges. This meeting, which took place for the first time since 2017, aimed to emphasize the importance of addressing financial risks within the economy.
In a read-out issued on Tuesday, Xi urged the ruling Communist Party to enhance the supervision of financial institutions. This includes extending considerable credit support to struggling firms and directing more funds towards strategically significant industries.
Policymakers have also made a commitment to tackle the potential dangers linked to smaller regional banks as well as financing vehicles of local governments.
According to the statement, there remains a pervasive presence of concealed economic and financial risks. Instances of financial turmoil and corruption persist, while financial oversight and governance are lacking in strength and efficiency.
The Chinese spy agency, typically uninvolved in addressing financial risks, has committed to actively participating in safeguarding economic stability. In a recent announcement, the Ministry of State Security declared its determination to clamp down on individuals who disseminate pessimistic perspectives about the Chinese economy in an attempt to destabilize global investor confidence.
Some individuals attempt to criticize or belittle China, aiming to erode the trust of the global community and disrupt our nation's financial stability, according to a statement posted on our WeChat social media account.
The statement further emphasized the need for national security agencies to take strong action against illegal and criminal activities in the financial sector that pose a threat to our country's security.
