Despite authorities suspending trading in over 50 percent of domestic stocks, banning large holders from selling, funding state-owned financial institutions’ purchases, and arresting short-sellers, China’s CSI 300 Index crashed in the morning Thursday, before eking out a 2 percent gain by midday.
As Breitbart News reported last night, the credibility of China’s Communist Party leaders President Xi Jinping and Premier Li Keqiang has been shattered after the relentless 16-trading-day stock crash.
Having told the public in late 2013 that it was their patriotic duty to support the nation’s “Silk Road” reforms aimed at letting market forces play a “decisive role” in the economy, over 80 million Chinese residents for the first time opened brokerage accounts and bought shares in state-owned enterprises.
Chinese state media’s cheerleading helped drive the markets up by over 150 percent to a peak on June 11, 2015. At the time, the average stock in China was selling at a 40 percent premium to Hong Kong stocks, which hit a six-year-high on the same day.
But since China markets peaked, the 32 percent loss for major company shares has caused panic and regret as tens of millions of middle class Chinese have lost their life’s savings, with markets losing $3.4 trillion in value.
After China’s stock market suffered over $500 billion in losses on Wednesday, the China Securities Regulatory Commission (CSRC) said in a statement that “Major shareholders, directors, supervisors and senior managers are encouraged to maintain steady stock prices by buying more shares when prices fall sharply.”
CSRC also suspended insider-trading restrictions, and the regulators “suggested” that “major shareholder holding over 30 percent of stake in a listed company may immediately increase its holding by another 2 percent, needless to wait for 12 months as required before.”
The Xinhua state news agency reported that to stop the crash, CSRC had barred holders of more than 5 percent of any company’s stock from selling for the next six months in order to avoid “panic sentiment” gripping markets.
Police were instructed to investigate “malicious” short selling of stocks, and the banking regulator said it would allow lenders to roll over loans backed by stocks.
Major shareholders of major Chinese banks, including ICBC bank and corporations such as Sinopec, were reported to have pledged either to maintain their holdings or to increase their ownership in the companies.
After the flurry of government intervention in the stock markets, Bloomberg News observed, “In China, the invisible hand of the market sometimes needs help from the iron fist of the state.”