China's state media says markets are being 'irrational,' calls for calm amid trade frictions

  • The recent sell-off in Chinese stock markets is an "irrational overreaction," according to the country's state newspapers such as Securities Daily and Economic Daily.
  • Shares in the world's second-largest economy have entered bear territory on escalating trade tensions between China and the U.S.

Chinese state media on Tuesday called a recent sell-off in mainland stock markets an "irrational overreaction" and urged investors not to panic over growing trade frictions between Beijing and Washington.

The comments, made in newspapers such as the Securities Daily and Economic Daily, come as China's Shanghai bourse dove to more than a two-year low on Monday as the brewing trade war threatens to knock the world's second-largest economy.

"Intensifying trade frictions between China and the United States is a test that the Chinese economy inevitably had to experience during its rise," the Economic Daily said.

"We have long anticipated and prepared for this... The impact on the Chinese economy is within a controllable range."

The Securities Daily newspaper called the slump in the A-share market an overreaction, saying that investors should have confidence in China's domestic market and that the current macroeconomic situation was stable.

Investors are jittery ahead of a July 6 deadline when the United States is set to impose tariffs on $34 billion worth of goods from China, the epicenter of a heated trade dispute between Washington and major economies that has convulsed financial markets.

Beijing is expected to respond with tariffs of its own on U.S. goods as the trade fight between the world two biggest economies threatens to damage global trade and investment.

Li Yang, director-general of government think-tank National Institution for Finance & Development (NIFD), told the Global Times newspaper that he did not think the financial panic would evolve into a wider financial scare and that authorities had proven effective in the past to pacify market sentiment.

A NIFD report which said that China should be wary of any financial panic stemming from uncertainties appeared briefly online last week before being removed. Li said that report was for internal discussion.