With China’s stock market plunging by as much as 80 per cent this year, many are calling for the country’s central bank to step in and pump up the market, to try to stabilize it.
The central bank has refused to do so, saying that its market-moving powers are limited and its assets are limited.
With the markets still struggling to recover from the initial shock of the global financial crisis, the market could still fall further.
The government is still trying to stabilize the market and has already been calling on the central bank for some help.
“China has always been a country that is in a recession.
We have to be able to stabilize our market,” said Wu Chun-yan, an economist with the Hong Kong-based China Research Centre.
“If we can’t stabilize the markets, it would be the beginning of the end of the country.”
A big fall in the yuan’s value would also mean more Chinese imports for U.S. goods, putting pressure on the country to cut its trade deficit with the United States.
The U.K. also warned last week that a large trade deficit would mean higher U.N. sanctions.
The Chinese government, however, has said that the yuan will not fall to below the $1.50 to $1,100 mark.
“The yuan will remain stable,” China’s central banker, Bo Xilai, said during a meeting with investors in Shanghai on Monday.
“It will stay in the $US1.90 to $US2.00 range.”