Foreign forces blamed for China’s market woes

Opinion leaders spread nationalist messages online in effort to slow stock plunge

BEIJING— There are now officially more stock market investors in China than there are Communist Party members, Bloomberg reported this week.

But if capitalists now definitively rule China, they have had a very rough few days.

China’s stock market slumped again Thursday, despite fresh moves by regulators to arrest a decline that has seen the benchmark index in Shanghai lose 24 per cent since June 12 and $2.4 trillion (U.S.) wiped off equity valuations.

Reuters said the sudden market decline “raised questions about how much more firepower Beijing can bring to bear before a full-scale panic sets in.”

The latest weapon appears to be a good old-fashioned dose of nationalism, as opinion leaders took to social media to urge investors to hold onto shares for the glory of the Chinese nation.

“Believe in my country,” Cao Zenghui, deputy general manager of Sina Weibo, whose company runs China’s main microblogging service and who personally has more than 100,000 followers, posting a national flag as his profile image.

“It is not just a stock market issue any more. I will fight with forces who short China’s economy. No eggs can remain unbroken when the nest is upset.”

The Shanghai Composite index fell 3.5 per cent Thursday, closing below the psychologically important level of 4,000, one that many investors had believed the authorities would defend by buying shares.

The market had surged150 per cent in the year to June 12, most of those gains recorded in the past eight months.

Some saw the authorities’ hand at work in that feverish bull market, in an attempt to boost personal wealth and consumer spending at a time when economic growth is slowing and the property market has been weak. But if so, it is in danger of backfiring. In the past few days, Chinese authorities have eased monetary policy, suggested more pension funds would invest in stocks, cut trading fees and even relaxed rules on using borrowed money to speculate in the markets.

But none of it has provided more than short-lived relief.

Retail investors dominate the market, and many are believed to have borrowed heavily to reap quick profits when the market was rising, Reuters says.

“I will fight with forces who short China’s economy. No eggs can remain unbroken when the nest is upset.” CAO ZENGHUI DEPUTY GENERAL MANAGER, SINA WEIBO

Now, some are being forced to withdraw to avoid losing money they don’t have.

In the past few days, rumours have circulated on the Wechat messaging service that “international capital” — or simply capitalism itself — was attacking China. Goldman Sachs and the Hong Kong office of China Southern Asset Management were supposed to be profiting from short-selling the market — rumours that were later rubbished by the China Securities Regulatory Commission. On Thursday, Chinese media also implied that George Soros or Morgan Stanley might be to blame.

Fan Shaoxuan, a senior executive at Weibo TV who has more than 12,000 followers on Sina Weibo, posted a photograph showing the slogans: “Hold stocks with confidence. Win glory for the country even if you lose the last penny.”