China’s capital markets seem to be undergoing a sustained change in recent months. In spite of this, we need to try to put these recent moves into a broader context to understand if they are a threat to investments, a major change or just a readjustment of policy.

The initial reaction was that Pres­ident Xi Jinping was hell-bent on de­stroying the Chinese capitalist model. Former Australian Ambassador to Chi­na Geoff Raby has argued that these changes represent a shift away from former Chinese leader Deng Xiaop­ing’s declaration: “It doesn’t matter whether a cat is black or white — so long as it catches mice”.

Raby suggests that it now matters very much what colour the cat is. But there is a strong case to suggest that Deng’s observation that “social­ism is not poverty” plays a far more important part in President Xi’s ap­proach, especially if you remember that Xi spent his youth as a student sent down to the countryside.

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