China’s Unsettling Stock Market Collapse
Skittish at the prospect of further losses, the Chinese government has taken action. On Saturday, the country’s largest brokerage firms agreed to establish a fund worth 120 billion yuan ($19.4 billion) to buy shares in the largest companies listed in the index. Beijing has also lowered interest rates, relaxed restrictions on buying stocks with borrowed money, and imposed a moratorium on initial public offerings. The country has even relied on propaganda to encourage the public to hold onto their shares for patriotic reasons.
.. The boom was fueled by retail punters relatively new to investing—according to the Financial Times, more than 12 million new accounts were opened on the stock exchange in May alone. Once dominated by elites, the stock market increasingly has become a vehicle for China’s emerging middle class. Two thirds of households who opened accounts in the first quarter of 2015 didn’t even finish high school. Equity market fever has spread to China’s universities, where 31 percent of the country’s college students have invested in a stock. Three quarters of them used money provided by their parents.
.. According toBloomberg, over 90 million people in China have invested in equities—a number greater than the total membership in the Chinese Communist Party.