Chinese authorities have announced stock purchases worth 60 billion yuan (8.858 billion dollars) to stabilise markets that have fallen by up to 25% in July. The regulator has summoned institutions to an urgent meeting.
The collapse of Chinese stock markets during July has prompted Beijing to intervene decisively. Over the weekend, state-owned companies China Reform (CRHC) and China Chengtong announced the purchase of shares totalling 60 billion yuan (around 8.858 billion dollars). The measure aims to halt losses that in some indices, such as the Shanghai Star Market, have reached 24.69% since July 1.
Official statements from both firms convey a message of "firm optimism" regarding the prospects for Chinese stock markets. They indicate that they will continue to use their own funds, buybacks, and repurchase mechanisms to "maintain stable operations" in the markets. The definitive signal came today when the financial newspaper Securities Times confirmed that the national regulator, the China Securities Regulatory Commission (CSRC), has summoned "numerous market institutions" to a meeting taking place this Monday.
A black July for Chinese stock markets
The intervention responds to a widespread downward trend. The benchmark of the Shanghai Stock Exchange fell 8.47% from the beginning of July until last Friday. The Shenzhen index, focused on technology stocks, performed worse, with a drop of nearly 15%. The CSI 300, which measures the performance of the three hundred main stocks from both markets, has accumulated a decline of around 8.7%.
The technology sector has been the hardest hit. The Star Market, China's equivalent of the Nasdaq, hit a record high on July 1 and has since embarked on a continuous decline. The 24.69% drop in just three weeks has raised all alarms in Beijing. This trend is not an isolated phenomenon: it follows the pattern of other international markets, affected by the sell-off of chip-related stocks and fears of a potential bubble in artificial intelligence (AI), in addition to the escalation of conflict in the Middle East.
The shadow of CXMT's IPO
In this context, the imminent IPO of chip manufacturer CXMT has reignited fears of a liquidity crisis. The operation, valued at up to 9.8 billion dollars, is the second largest in the history of Chinese markets. Although it has attracted demand far exceeding the offered shares —more than 200 times from retail and nearly 600 times from institutional investors—, these rates are lower than the investment frenzy of recent months.
For investors interested in Asian markets, this intervention provides temporary relief, but does not dispel doubts about the health of the Chinese technology sector. Today's meeting of the CSRC with listed companies could announce new measures, such as restrictions on short selling or expansion of buyback programmes. The coming days will be crucial to see if state financial muscle can contain the bleeding or if, on the contrary, selling pressure persists.
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