A week of wild stock market swings continued on Thursday as China’s benchmark Shanghai Composite index closed up 5.3 percent. China’s other major indexes were also up, with the Shenzhen Composite gaining 3.58 percent and the tech-focused ChiNext also up over 3 percent.
The rally ended a five-day losing streak for Chinese markets that persisted despite the government’s attempts to stabilize trading through a new pension investment policy and surprise interest rate cut.
In fact, Thursday’s bounce could itself be a product of Beijing’s desperation given its somewhat miraculous nature. The Shanghai index jumped sharply as high as 6 percent in the last 46 minutes of trading, a swing that Business Insider’s David Scutt called “ridiculous” and said “reeked of government intervention.”
Bloomberg seemed to confirm that, citing sources who said government officials were keen to right the market ship prior to a military parade on September 3 that will mark the 70th anniversary of China’s victory over Japan in World War II.
“The intervention is the latest measure to ensure nothing detracts from the parade, an event the government will use to demonstrate its rising military and political might,” Bloomberg reported.
Beijing has become increasingly worried about how the markets – and other sagging indicators – might impact the broader economy, and by extension, the Communist Party’s legitimacy. Leaders have been eager to promote the soaring stock markets as a sign of China’s strength, but falling share prices could call that into question. Since becoming president in 2013, Xi Jinxing has focused on creating an aura of invincibility around himself as he pursues a rampant anti-corruption campaign and consolidates authority.
But the stock troubles have posed a key economic challenge. After years of liberalizing reforms, China has been heavy-handed in its attempts to stabilize the situation. On Sunday, it announced that pension funds could invest in the markets, a move that was seen as adding some confidence to the mix. And on Tuesday, the People’s Bank of China cut interest rates for the fifth time in the last year.
Thursday’s apparently engineered rally also comes just a few days after reports emerged that Chinese government officials had decided to stop intervening altogether because of what they considered as a dubious connection to conditions in the broader economy.
Officials have also persisted in pushing a narrative of economic strength, with Premier Li Keqiang saying Tuesday that “fundamentally, the overall stability of the Chinese economy has not changed, and positive factors sustaining a turn for the better in the real economy are accumulating.”