You might have heard some of the many silly things that goes off over in China but them paying out millions to stop a stock market crash is by far one of the most stupidest.
Some say that China is very savvy when it comes to finances but at the same time they are not. Typically they are able to make a profit in just about any business they turn their hands at, but then what they actually do with the profit made goes against basic financial principles. For instance is it sensible to go walking around Macau, strolling along with more than $40,000 tucked under your armpit?
Of course spending something like 19 billion does happen to be a low figure in regards to trying to stop what would essentially be the crash of the 3rd biggest stock market in the world. Certainly for China the figure is low. When you look into it deeper you can see that it was a private investment, at least officially and perhaps in name only. To be able to calm down the market it is likely that a lot more than 19 billion is needed.
Generally in China they use the stock market for short term flipping, not many believe in buying and holding onto stock. Gold is purchased and then displayed as being an investment, with only homes being seen as being a long term investment. It can take a lot of persuading for Chinese people to believe that the stock market isn’t risky and saving is a better way to go.
So will the billions invested in China be able to stop the stock market crashing down? Not likely.