Only real economic growth can calm stock market turmoil

Yet, a bitter but timely lesson that Chinese policymakers have seemingly learned from previous efforts to arrest the downward spiral of share prices is the absolute need to support the real economy.

It is unfortunate that China's economic slowdown is shaking the world economy nowadays. Although it is exaggerating to say that China has become a threat to global growth, the fact is the Chinese economy, a long-term leading global growth engine, is losing steam at a moment when the world economy has ground to its slowest annual growth since the 2008 global financial crisis.

As the world's second-largest economy, China has gone all out in recent years to shift its growth pattern from heavy reliance on trade and investment to more sustainable growth driven by innovation and domestic consumption. Successfully attaining this economic transformation would mean as much to the world as China's rapid growth over the past three decades.

While the stakes are high, the difficulties in pushing through the country's economic transformation are also huge as the double whammy of sluggish growth and a stock market crisis show.

China's latest monetary easing may not ratchet up enough support for the plunging domestic stock market. But it can give a needed boost to the stumbling real economy by lowering financing costs. More importantly, it sends a clear signal to the international community that Chinese leaders will focus on real economic growth rather than the valuations of stocks.

In the long run, share prices in a healthy stock market should reflect the performance of listed companies which, on the whole, is determined by the health of the economy. For Chinese policymakers who have to deal with an economic slowdown and a stock market rout at the same time, the principle should always be that the tail should not wag the dog.

To cushion the global recovery against increasing uncertainties like falling commodities prices and the runaway depreciation of emerging economies' currencies, more government efforts are needed in China and around the globe to boost economic growth, not just rally share prices.

The author is a senior writer with China Daily. zhuqiwen@chinadaily.com.cn