THE Shanghai Composite Index fell 5.9 percent on Wednesday. The Shenzhen Stock Exchange, China’s second largest stock market, fell 2.5 percent for the day and nearly 40 percent since it peaked in mid-June. Well before markets closed in Shanghai, stocks for more than a third of listed companies had suspended trading, having plummeted below the minus 10 percent daily threshold set by the Chinese government. In Shenzhen, more than 50 percent of shares had been taken off the market by day’s end. Had the government not suspended trades on more than 1,300 companies’ stocks, overall declines would almost certainly have been steeper.
China’s stock market bubble — at least this iteration of it — has burst. In the three weeks since market capitalization across the country’s largest exchanges peaked at around $10.3 trillion, China’s markets have lost more than $3.2 trillion in value. That is greater than the economy of the United Kingdom. For all its efforts, the Chinese government has been unable thus far to stop, or even slow, the decline. What began as a series of soft, sporadic nudges from the country’s securities regulator — for example, light restrictions on access to margin loans, or loans used to invest in stocks, to contain irrational exuberance — has over the past week become a torrent of increasingly substantial and overt interventions by a range of government authorities and government-affiliated financial institutions, such as the central bank, the securities regulator, China’s largest brokerages, state-owned enterprises and mutual funds. For all intents and purposes, none of it has worked. The market continues to fall.
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