🌍 China is preparing for a major stock market intervention

Plus: Elections this weekend

Hi Intriguer. I first arrived in Beijing in 2015, just as China (and the world) was dealing with the fallout of the Shanghai stock market crash. The Chinese government spent about $240B to prop up the stock market at the time, with limited success.

If history doesn't repeat itself, then it often rhymes - our briefing today looks at reports that China is once again planning to spend a lot of public money to prop up its slumping stock markets.

Looking back, I think the 2015 crash was the moment when Xi Jinping decided that China could no longer be at the whim of free market dynamics and that the Communist Party needed more control over all facets of the economy.

- John Fowler, Co-Founder

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China is preparing for one of the biggest stock market interventions in history

Will the intervention slow China’s stock market fall?

Beijing is reportedly weighing a ~$278B intervention into China’s stock market, with an announcement expected as soon as this week. 

To put that into perspective, China spent ~$240B bailing out 22 countries struggling with their Belt and Road Initiative payments from 2008 to 2021.

It’s been a tough few years for China’s stock markets: 

  • An index tracking the Shanghai and Shenzhen stock markets (the CSI 300 Index) has lost a third of its value since 2021. It closed at a five-year low on Monday.

  • Hong Kong’s market is down 10% this year, making it the worst-performing market in Asia.

  • And China’s overall foreign investment flows have turned negative for the first time since records began in 1998.

What’s causing all this? 

China’s stock market is like a straw in the wind, and right now, it's being buffeted by a mix of economic challenges like rising debt, record youth unemployment, a shrinking population, a real estate crisis, and government crackdowns. All that has eroded investor confidence, which is showing up in falling stock prices.

Markets have been waiting for President Xi to jolt things back to life with rate cuts and stimulus, as China did back in 2008 in a package worth $586B. But this time, he’s moved slowly, mindful of possible side-effects on debt, the yuan, and beyond.

Why intervene now?

Problems in China’s stock market are metastasising from the economic to the political. More than 220 million Chinese people are invested in stocks. Combine that with households who’ve already got 70% of their wealth tied up in a limp property sector, and you’ve got a lot of anxious and potentially very angry people.

That’s got to be unnerving for Xi and the Chinese Communist Party, whose political legitimacy is tied to China’s prosperity.

So, here’s how Xi plans to respond: Bloomberg reports that his team is looking to use offshore funds held by state-owned enterprises (SOEs) and pool them to “buy shares through the Hong Kong exchange link” and halt the market’s fall. 

But reactions so far have been mixed.

While Chinese and Hong Kong stocks jumped on the news, international investors seem less convinced: a $278B package, while big, probably isn’t big enough to address China’s underlying problems.


It’s hard to think of a better way to encapsulate China’s unique model: using offshore funds from state-owned enterprises to prop up a stock market.

But will it work?

Maybe this move helps stabilise prices and puts a floor under consumer confidence. Or maybe it doesn’t, and the malaise spreads to SOEs who end up holding a quarter of a trillion dollars in declining stocks.

When talking about the animal spirits of a market, the outcome often rests less on the substance of any package and more on the signal it sends.

The signal Xi likely wants to send here is that he means business. But the signal many will actually hear is that he’s worried.

Also worth noting:

  • On Monday, Chinese Premier Li Qiang called for ”forceful” interventions to “enhance the inherent stability of the market”, walking back his comments in Davos last week that China “did not resort to massive stimulus”.


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  4. 🇻🇪 Venezuela: Authorities have issued 14 arrest warrants for alleged plots to assassinate President Maduro and his defence minister. One of the accused, a human rights lawyer living abroad, responded that Venezuela “continues to criminalise the work of lawyers”.

  5. 🇨🇻 Cape Verde: US Secretary of State Blinken has kicked off a four-country tour across Africa with a visit to the Portuguese-speaking archipelago of Cape Verde. His visit comes as security deteriorates in the Sahel region, and China continues its push for more regional influence.


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Do you think China's economic woes are worse than what the government is letting on?

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🟩🟩🟩🟩🟩🟩 🌊 Climate change (51%)

🟨🟨⬜️⬜️⬜️⬜️ 💻 Cybersecurity (22%)

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  • 🌊 D.D: “Hurricanes alone caused more than $80 billion in damage in the US in 2021. That is more than what the US has provided Ukraine. Add other climate-related damage (fires, floods, freezes, etc.) and we are talking about hundreds of billions of dollars a year in the US alone. And this number will only go up.”

  • 💻 Y.J: “When you hear about hackers taking over hospitals and demanding money to unlock their systems .. that’s cold, very cold!”

  • ⚔️ C.B: “The industry is hardening in markets once considered low risk due to internal or external geopolitical tensions.”

  • ✍️ M.A: “Surely it is the moral risk of there being an afterlife.”


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