Reform is what advocates of the China 'bubble' have missed
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THE view that the rapid run-up in Chinese stock prices since mid-2014 has been mostly driven by liquidity and hype ignores the importance of a strong stock market in advancing Beijing's financial reform, in particular by channelling more household savings into equities and, hence, reducing the reliance of corporate funding on banks and shifting it to the equity market.
A successful transformation could lead to a fundamental re-rating of Chinese equities in the long term.
Encouraging robust market sentiment helps Beijing to achieve a number of policy objectives, including:
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