The Chinese authorities seem to have a very ambitious plan ready for the next day in the country's stock markets. With the "war" that has broken out between the Government and the giant companies, the result so far is to lose many trillions of capitalization, but looking at the big picture, it seems that in the end the goal is close to being achieved.
As we mentioned in a recent weekly report, one of the goals of the policy pursued by the Chinese authorities was to reduce the size of huge companies, in order to create space in which smaller and more innovative companies fit in, which however could not attract investment funds.
This week, it was announced that China will set up a new Beijing-based stock exchange aimed at small and innovative companies. This way, investment funds that specialize in these companies will be able to find and analyze them more easily. China is creating a new way to attract more capital from investors and at the same time protect its economy from the bubbles created by the unilateral inflow of capital into very large companies.
China is constantly trying to diversify its economy in order to take advantage of huge investment funds in other sectors such as health and banking. The result of this effort will be seen in the future, but a first estimate is that the Chinese stock markets will become stronger and that excellent investment opportunities are already being created.
In the short run China will continue to be a bit unpredictable in the sense that the authorities will continue to try to tighten the rules. But there are already being done efforts for the affected technology and education companies, to defuse the crisis and to compromise. Trading volumes in China's largest ETF show that investment interest has been particularly high in recent weeks.
There is also huge investment interest for Alibaba.