EU calls for more transparency from China

China needs to be more transparent in explaining its financial policies to the world following a stock- market tumble over the summer, and be aware of risks from new financial instruments, a senior EU official said yesterday.

World financial markets have been watching closely since Chinese stock markets collapsed in mid-June following a long bull run, in turn dragging down indices across the globe.

In reaction, Beijing unveiled a series of policy changes and intervention aimed at shoring up markets and staving off full-blown panic, though some steps, like investigating reporters for spreading rumours, have appeared out of step with Chinese efforts to modernise how it handles the economy.

Speaking after a high-level EU-China economic and trade dialogue and a meeting with Chinese premier Li Keqiang, European Commission vice-president Jyrki Katainen said he had been encouraging China to communicate more clearly what it was doing.

“There are millions of people who are assessing one specific country’s moves in the international markets, so the reaction can be quite unintended if there are misunderstandings or lack of information why some particular moves have been done,” he said.

There was clearly an overreaction to the moves in the Chinese stock markets, Katainen added.

“One interpretation why the markets overreacted was because there was not enough information in the market, and people started to think the market fluctuations were the clearest sign of some severe meltdown. This is obviously not the case.”

China must also learn the lessons from the US and Europe about risky new financial products, Katainen, a former Finnish prime minister and finance minister, said. n Reuters