Even when China’s stock market rose 59 percent from January this year to June, many outside observers thought the Chinese stock market was an accident waiting to happen.
Many Chinese, however, thought for better or worse that the Chinese regime was actually in charge of managing the market and would be able to prevent a crash. With the benefit of hindsight, this view has been both right and wrong at the same time.
The regime was not able to prevent a drop of almost 30 percent in June and July. However, it did manage to contain the damage, engineer a small rebound, and was certainly active in the markets again on Wednesday: Stocks went down 5 percent before miraculously recovering to close up 1.2 percent.
A crash of more than 10 percent in two days probably was too much to stomach for the authorities.
According to Reuters, it was the “national team” of brokers, mutual funds, and state-owned China Securities Finance Corp who rushed in to stem the tide. Usually, this exercise is enough to convince the majority of retail investors to also start buying again because the government is buying.
