PNG feeling the pinch of market fall

 THE impacts of China’s stock market crash can be felt locally especially for neighbours PNG and Australia, if it causes sharp retraction in economic activities, Institute of National Affairs executive director Paul Barker says. 

“Especially those with a more international remit are substantially impacted and if it causes a sharp retraction in economic activity and hence demand for imported raw materials, notably from PNG and our neighbours … especially as China was PNG’s third largest single export market in 2013, and that would have jumped up during 2014, since the commencement of LNG exports to China (Japan and Taiwan)..”

He said authorities were partly responsible for this latest stock market crisis in China. 

“They were actively trying to stimulate the market (as the economy was slowing down) and reduced liquidity requirements in the banks to free up money (encouraging potential speculative investments) openly promoted bullish market prospects about three weeks ago, encouraging large numbers of amateur stock market investors to pile in.” 

Barker added that for many major resource projects, China was becoming an increasingly major investor.

“And in some cases operator, both because of a policy to increasingly manage the supply chain themselves, from production to shipment and consumption or manufacture in China … but because Chinese companies and financiers seemed the only ones with the level of available international capital,” he said. 

“If this bursting stock market (and possibly property bubble) has wider market and economic ramifications in China, it will trigger difficulties for China playing such an active market role as investor or financier, than had been (increasingly) envisaged just recently, or at least it will stall the capacity until markets and confidence are firmly restored.”