President Xi Jinping Receives Briefing on Financial Markets as Chinese Stocks Plummet

(Bloomberg) — Chinese regulators are set to provide President Xi Jinping with a comprehensive briefing on the state of the country’s financial markets. This move underscores the urgency in Beijing to stabilize the plunging stocks and restore investor confidence.

People with knowledge of the matter, who asked not to be identified as the information is private, revealed that the China Securities Regulatory Commission (CSRC) and other regulators plan to update the top leadership on market conditions and the latest policy initiatives. The briefing is scheduled for Tuesday, although the timing is subject to change. It remains unclear whether any new support measures will result from the meeting.

The decision to brief President Xi Jinping highlights the mounting pressure on Chinese authorities to find effective solutions to halt the slump in stocks. Despite implementing several piecemeal measures over the past few months, investor sentiment has not improved. The Chinese and Hong Kong equities have collectively lost approximately $7 trillion in value since reaching their peaks in 2021.

In response to the deteriorating market conditions, authorities issued a series of supportive announcements on Tuesday. Central Huijin Investment Ltd., the unit responsible for holding Chinese government stakes in major financial institutions, pledged to purchase more exchange-traded funds to ensure the smooth operation of the capital market. The CSRC emphasized its commitment to maintaining stable market operations.

The CSI 300, a major Chinese stock market index, experienced a 1.8% increase as of the midday break, slightly reducing its year-long decline to 20%.

President Xi Jinping has shown increasing involvement in the nation’s financial and economic policies, including an unprecedented visit to the central bank in late 2023.

According to insiders, authorities have been working tirelessly over the past few months to develop effective market rescue measures. The CSRC and the National Financial Regulatory Administration have held numerous meetings and worked on weekends to stabilize capital markets.

Bloomberg reached out to the CSRC and the NFRA for comments, but they did not respond immediately.

As part of their efforts to stem losses in stocks, officials have tightened trading restrictions. Some quantitative hedge funds are now banned from placing sell orders, while others are prohibited from reducing stock positions in their leveraged market-neutral funds. Additionally, the securities regulator announced on Monday that it would guide brokerages in adjusting their margin call levels and maintaining “flexible” liquidation lines to limit forced liquidations.

Previous measures aimed at restoring investor confidence included curbs on short selling and state-led buying of shares in major banks. A $278 billion stock stabilization fund was also under consideration.

Unfortunately, these measures have had limited success. Investor confidence has been eroded in recent years due to an economic slowdown and President Xi Jinping’s increasing control over private enterprise, as well as sweeping crackdowns.

The nation’s small-cap shares experienced a more than 6% decline on Monday, reaching their lowest point since 2018. The benchmark CSI 300 Index also dropped to a five-year low earlier this month. Investors are anticipating further losses before the weeklong Lunar New Year holiday, leading some traders to reduce their positions out of concern that risks such as geopolitical tensions and sluggish consumption may exacerbate the market’s downward trend.

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