Instead of blaming 'novice' mainland speculators for upsetting global stock markets, investors should examine how officials from Tokyo to Thailand - as well as Washington - are manipulating the world economy. After watching global markets lose about US$1 trillion in value last week, some observers in this region, known for its economic dragons, have begun blaming market moves on 'dragonomics' - in which officials drag markets up or down to suit their agendas.
China's one-party government has tried for weeks to cool an overheated stock market by curbing bank lending and warning novices not to bet their life savings on what locals call 'the slot machine'. 'There is a bubble going on,' National People's Congress Standing Committee vice-chairman Cheng Siwei warned in January. 'But in a bull market, people will invest relatively irrationally. Every investor thinks they can win. But many will end up losing.'
When that didn't work, the government last week warned market players not to bend the rules, and spread rumours that it would slap taxes on stock gains. That worked - perhaps too well - and the market dropped nearly 9 per cent on Tuesday, starting a domino effect around the world.
Perhaps fearing a free fall, the government coaxed the markets to rebound on Wednesday by declaring that it might allow more foreigners into the Shanghai and Shenzhen bourses. Local investors, who are used to reading between the lines, are watching closely for signals from this week's National People's Congress meeting in Beijing.
In Japan, cabinet ministers and party bigwigs have pressured central bankers to keep interest rates near zero. This in effect sanctioned the 'yen carry trade' that allowed many wealthy Japanese to borrow in yen, convert into higher-yielding currencies, and profit from property bubbles in Mumbai and New Zealand, and from markets in Shanghai, Vietnam and beyond - rather than spending it in Japan.
Critics of the policy include Eisuke Sakakibara, former currency-policy chief at Japan's Ministry of Finance, who said last week that the Bank of Japan should have raised interest rates in December instead of waiting until late last month. The Japanese media - which leaked the bank's decision to raise rates - routinely runs false stories, quoting unnamed sources, that jolt the markets.
