Any capital outflow must not be allowed to hurt stock market

China’s stock market continued to tumble on Tuesday but, unlike other major indexes across the world, the fall was not triggered by the terrorist attack during an Ariana Grande concert at Manchester Arena in the United Kingdom on Monday. Instead, the weakening of the Chinese stock market in recent weeks is a reflection of the domestic market’s inherent problems and the unstable global macroeconomic and financial situation.

The benchmark Shanghai Composite Index dropped by a moderate 0.45 percent to hit 3061.95 on Tuesday, but most stocks slumped, with only a small number of big-cap stocks managing to rise. Since early April, the SCI has dropped 7 percent, with individual stocks slumping by much larger margins.

It is reasonable to attribute the fall of stocks to the economic slowdown and the tight regulation that China has imposed on the market to curb broad financial risks.

China achieved an impressive GDP growth of 6.9 percent in the first quarter of this year, higher than the 6.7 percent growth last year. But most analysts say the strong growth could gradually ease in the coming quarters given the stringent tightening of the real estate market.

The real estate sector and related industries have contributed to a significant part of China’s growth, but the exorbitantly high housing prices have compelled the government to impose strict restrictions on sales and raise the down payment for homebuyers in most major cities, which could slow the growth of the sector and thus the overall economy.

... the CSRC has been very cautious in guiding the index lower so that a capital outflow does not have a serious impact on the domestic stock market.