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Beijing launched an extraordinary series of “rescue measures” since late June to stabilize China’s volatile stock markets, which had plunged by nearly 30% in three weeks after hitting historic highs in mid-June.
The following timeline sets out the measures, announcements and market developments of the period leading up to the crash:
June 24 (Wednesday) – The State Council, China’s cabinet, scraps the longstanding requirement that caps lending by commercial banks at 75% of their deposits.
June 27 (Saturday) – The People’s Bank of China cuts guidance lending rates by 25 basis points and trims the reserve requirement ratio for financial institutions.
June 29 (Monday) – China Securities Finance Corporation (CSF), the only official margin lender for brokerages, says the risk associated with margin trading is controllable and the amount of forced liquidation for meeting margin calls is relatively small.
Later in the day, China says it will allow pension funds to invest in the stock market for the first time, according to proposals released by the Ministry of Finance. The move could bring more than Rmb1 trillion ($160 billion) into the equity market.
July 1 (Wednesday) – China Securities Regulatory Commission (CSRC) moves to loosen rules on margin financing, in which investors borrow money from brokers to buy stocks. The regulator previously tried to curb the margin lending business.
Separately, China’s two major bourses, Shanghai and Shenzhen stock exchanges, announce plans to cut transaction fees by 30% from August.
In addition, China’s Financial Futures Exchange denies rumors that foreign investors including Goldman Sachs were using index futures to short Chinese A-share stocks.
July 3 (Friday) – The CSRC says that CSF will increase its capital base from Rmb24 billion to Rmb100 billion, and raise additional funds from other channels for business expansion and market stabilisation.
July 4 (Saturday) – Twenty-one of China's biggest securities firms pledge to jointly invest Rmb120 billion ($19.3 billion) in shares of big state-owned enterprises to help steady stock markets.
Later in the day, 28 Chinese companies indicate they will postpone their initial public offering plans, with most attributing the decision to the “recent big market volatility”.
July 5 (Sunday) – The CSRC announces that it will suspend IPOs in the near future, although it will not stop reviewing IPO applications. The suspension comes as a surprise given the securities regulator had recently indicated it would grant 10 companies IPO approval in early July.
July 7 (Tuesday) – More than 700 companies suspend trading on the Shanghai and Shenzhen exchanges, accounting for one third of all stocks listed in China. Many are small and mi-cap firms. In their filings with bourses, most cite “significant issues” as the reason for the requested suspension without further elaboration.
July 8 (Wednesday) – The central bank says it is “actively assisting” CSF to ensure it has ample liquidity through interbank lending, bond issuance and collateral finance.
The CSRC subsequently says that CSF has offered Rmb260 billion ($42.4 billion) in credit lines to 21 big Chinese brokers, which pledged to invest Rmb120 billion to set up a blue chip-based exchange traded fund (ETF).
In addition, all listed SOEs promise not to sell their own companies’ shares, following a request from the State-owned Assets Supervision and Administration Commission, the powerful agency which oversees China's largest state-owned companies.
July 9 (Thursday) – China’s banking regulator says it will allow lenders to renegotiate maturity terms for stock collateral loans and encouraged banks to offer capital to firms planning to buy back their own shares.
Separately, the PBoC says it has provided “abundant liquidity” to CSF to help stabilize the market, according to the official Xinhua News Agency.
June 10 (Friday) – Beijing’s efforts to shore up market confidence finally starts to bear fruit on Thursday and Friday, with the benchmark Shanghai Composite Index posting its biggest two-day gain in years.
However, as of Friday, the number of listed companies that have halted trading still stands at roughly 1,400, about half of all stocks listed in China, according to the official Securities Times.
July 12 (Sunday) – Meng Qingfeng, vice minister of public security, says a special team lead by himself found evidence about certain market manipulators and short sellers, adding the team will carry out future probes, the official Xinhua News Agency reported.
July 13 (Monday) – More than 300 companies will resume trading their shares today, according to the domestic financial information provider Tonghuashun.
July 13 (Monday) – China’s securities regulator probed Hundsun Technologies, a Chinese financial services software provider controlled by Alibaba founder Jack Ma, amid Beijing's crackdown on margin financing, especially as it played out on the grey market.
Hundsun said later in the week that no new accounts will be opened, and that it will ban capital increases of existing accounts and close accounts without balances.
July 17 (Friday) – China’s state-owned banks jointly provided Rmb1.3 trillion ($200 billion) to the China Securities Finance Corporation to help stabilise the stock market, according to state media reports.
July 20 (Monday) – The CSRC reiterated its determination to stabilise the country’s still-volatile equity market, denying a report in financial magazine Caijing that it was studying plans to recover funds recently deployed to help improve market liquidity.
August 4 (Tuesday) – Several Chinese brokerage houses, including Citic Securities, the country’s largest broker by assets, voluntarily suspended short-selling of stocks after the securities watchdog moved to clamp down on the practice.
Separately, the International Monetary Fund staff proposed extending the current SDR basket to September 2016 as significant preparatory work needs to be done ahead of the final decision on whether to include the Chinese currency.
August 5 (Wednesday) – China spent approximately Rmb900 billion ($140 billion), or roughly 2.2% of the stock market's total value, in funding to rescue its capital markets since June, according to a Goldman Sachs estimate. The US bank said the potential amount of the market-support capital that the so-called “national team” could deploy is up about Rmb2 trillion ($310 billion).
August 11 (Tuesday) – China caught global markets by surprise when it moved to devalue the renminbi by almost 2% against the dollar, the largest one-off depreciation in two decades, in an effort to increase the yuan’s reserve currency status and boost sluggish exports.
August 20 (Wednesday) – The IMF said it will extend the current SDR basket by nine months, which means the Chinese yuan won’t be included in the basket till October of next year at the earliest.
August 25 (Tuesday) – The People’s Bank of China cuts benchmark interest rate by 25 basis points to 4.6% for the fifth time since November as the country tries to stave off the risk of a harder economic landing.
The central bank also cut the one-year saving rate by 25bp to 1.75% and will lower the reserve requirement ratio for banks by 50bp to 18% from September 6.
Separately, the powerful Ministry of Public Security has launched a three-month nationwide campaign against underground banks to crack down on money laundering and stem illegal capital flows in and out of the country.
China is also investigating some of the country’s top securities houses and has detained Xu Gang, a senior executive at Citic Securities, the largest broker by assets, for suspected involvement in market malpractice.
This item has been updated to reflect ongoing regulatory and policy initiatives by China's central government to bolster the country's capital markets.
