The key question being asked by investors in Chinese stocks – especially those offshore – right now seems to be whether the administrative intervention will impact critically needed market reforms. Most of the investors with whom we spoke tend to think that the recent policy changes have added uncertainty to the reform outlook, which is expected to revive and drive China's economy. Many also worry that the chances of an early further liberalization of capital flows, let alone a more freely floating exchange rate, have fallen radically and that the inclusion of the yuan in the SDR basket (a symbolic act of no substantive significance but an important prestige target for the Chinese leadership) may be delayed.
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