Media: China's economy on verge of collapse

China’s $6 trillion stock market rout reveals a painful truth for President Xi Jinping’s government: People are hopelessly gloomy about the outlook for the world’s second-largest economy, and their pessimism is becoming increasingly hard to ignore, Report informs referring to Bloomberg.

This month’s heavy selloff in China’s benchmark CSI 300 Index brings its plunge to a brutal 40% over the past three years, deepening anguish in a market dominated by mom-and-pop investors. A government rescue package under consideration backed by about 2 trillion yuan ($280 billion), first reported by Bloomberg News, and a sudden bank reserve ratio cut show that authorities are growing anxious to stem the rout.

But international and retail investors alike remain skeptical that these measures will be enough to prompt a sustained bounceback.

Compared to the country’s yearslong property crisis and demographic challenges, a stock market wipeout might look like a relatively superficial problem. Equities represent a fraction of the household wealth that real estate does, and there are no signs of systemic risk that might endanger financial stability.

But in a country where government control of financial commentary and economic data is tightening, markets provide a very public reminder of the problems that dog the real economy, from slumping house prices to rising trade tensions. The selloff risks damping consumer spending and business investment, making the economy’s troubles even worse.

Signs of urgency are growing among Chinese authorities, with Premier Li Qiang calling for “forceful” actions to stabilize markets earlier this week.

The $280 billion market rescue package under consideration and the announced RRR cut may help to put a floor under the current crisis. In 2015, authorities allowed China Securities Finance Corp., the main stabilization vehicle, to access as much as 3 trillion yuan of borrowed funds to buy stocks directly. The purchases kept the market range-bound, and prices only started to recover in mid-2016 when the economy began to improve.

But this time around, investors say they need to see more concrete actions from Beijing to prop up growth as well as policy shifts to drive a sustained rebound in the market.