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Chinese Government Launches Investigation Into Stock Market Manipulation; Update and Timeline

Updated: Wednesday, August 26, 2015 – 11:16 AM

(AFP) Chinese police have summoned 11 people including a financial journalist to assist investigations related to illegal stock market activities, state media reported, as the government targets volatility on the exchanges.

The Chinese government launched an unprecedented rescue package as the stock market plummeted 30 percent from mid-June, which included a crackdown on short-selling and funding a state company to buy shares on its behalf. 

Authorities have accused a Caijing magazine journalist of allegedly colluding with others to manufacture and spread false information on securities and futures trading, the official Xinhua news agency reported late Tuesday.

The magazine confirmed journalist Wang Xiaolu was subpoenaed by police but defended his actions. 

Wang wrote a story in July saying the securities regulator was studying plans for government funds to exit the market.

The China Securities Regulatory Commission (CSRC) quickly denied the Caijing story and labelled it “irresponsible”. 

But Caijing said it “defended journalists’ rights to do their duty under the law”, according to a statement posted on its website Wednesday.

The CSRC said earlier this month that the China Securities Finance Corp. — a state-backed company tasked with buying shares — would continue to have a role for a “number of years”, but would only enter the market during times of volatility.

The CSRC comments were widely seen by investors as a signal of less government intervention in the stock market.

Separately, eight people from Citic Securities, the country’s top brokerage by assets, are also suspected of illegal trading, including managing director Xu Gang, media reports said. No specific details were given.

A current CSRC employee who worked on public offerings and one former employee involved with market regulation are suspected of insider trading and forging official documents, the reports said.

Also, the China Financial Futures Exchange said on Wednesday it had restricted 164 clients from opening positions as a punishment for “abnormal trades”, according to a report by state media.

The restriction will last one month, the report added.

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© 1994-2015 Agence France-Presse

Posted: Wednesday, August 26, 2015 – 11:16 AM

(AFP) Key developments in the crisis on Chinese stock markets and the knock-on effect of the crisis in the world’s second economy on the world stage:

Chinese stock exchanges saw a year-long debt-fuelled rally, but have since June plummeted by more than 40 percent, and broad government interventions have failed to halt the decline.

– June 26, 2015: Chinese shares plummet spectacularly. The benchmark Shanghai Composite Index closes down 7.40 percent, while the Shenzhen Composite Index, plunges 7.87 percent.

The rout continues for another two months, with Chinese stocks losing more than 40 percent of their value since mid-June.

– August 11: China’s central bank announces a sharply lower 1.86 percent daily reference rate for the yuan against the US dollar, saying it is part of moves to make its exchange rate regime more market-oriented. 

The sudden devaluation is seen as an effort to make Chinese goods cheaper overseas.

Beijing carries out new devaluations on August 12 and 13, a drop of 4.6 percent in three days.

– August 12: Three key Chinese indicators, including industrial production, all come in below market expectations, pointing to further weakening in the Chinese economy and expected more policy loosening.

Asian stocks markets drop and European stock markets follow their lead, dropping  even further.

– August 20: Asian and European stock markets collapse. On Wall Street the Dow Jones falls to its lowest level this year.

– August 24: In what is dubbed “Black Monday”, Shanghai shares nosedive 8.49 percent, the biggest daily drop in eight years, after losing 11 percent the previous week. Panic spreads to major European and Asian stock markets, while commodity prices hit new lows.

– August 25: China’s central bank cuts its benchmark interest rates, the fifth since November, and slashes the amount of cash banks must keep on hand.

The Chinese measures lead to a rebound on European stock markets, while a similar rebound in US shares fizzles out.

– August 26: Global equity markets go on another rollercoaster ride. The Shanghai stock exchange closes lower. European markets drop, while Wall Street equities surge higher.

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© 1994-2015 Agence France-Presse

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