The Shanghai Composite Index (SCI) crashed for a total of 11.5 percent in the week of Aug. 21 , prompting a global equities selloff and a new round of investigations by Chinese regulators into its falling stock market.
China’s benchmark index is down 32 percent from its peak on June 12, despite efforts by Beijing to prop up the stock market over the last two months using such desperate measures as suspending trading, halting IPOs, and forcing banks to increase lending to brokerages.
In denial of the fact that a stock market can, and should, correct itself after becoming overvalued, Chinese authorities convinced themselves that the market cannot be allowed to fall. Put differently, stocks are so intertwined with politics that the Communist Party—which drummed up the market in the first place to enrich and control the populace—cannot afford to let it fall lest it loses all credibility.
