Beijing rolled out two regulations in the stock market: halting the disclosure of real-time trading volume and implementing stricter controls over delisting procedures. Experts believe these moves to restrict short selling will only undermine the transparency and investability of the Chinese trading market and dent investor confidence, further fueling market panic and capital outflows.
According to the April 12 announcement, real-time data on the buying, selling, and overall trading volume for overseas investors in the Shanghai and Shenzhen stock markets will no longer be available. The real-time short-selling balance will only be displayed when the trading volume of a single stock falls below 300,000 shares. Similarly, real-time quota balance will be shown only when the daily quota balance drops below 30 percent, while other times will be labeled as “available.”
Kuo-hsiang Sun, an associate professor at the Department of International Affairs and Business at Nanhua University in Taiwan, said this change will only “decrease data transparency to investors,” which will “reduce investors’ confidence, and finally market liquidity and trading activity.”
He believes that this change could potentially impact the relevant “investability of the crowdfunding market in China, … as well as Hong Kong’s status as a gateway to the stock market,” said Mr. Sun.
Taiwanese macroeconomist Wu Chia-lung explained to the Chinese language edition of The Epoch Times that real-time data means more to fund managers than ordinary investors. Many fund managers and investment institutions tend to lean towards short selling when the market is declining.
Restrictions Push Away Investors
However, he said the new regulations could actually instill panic among investors because they are uncertain about what other new measures may follow, especially when the market is declining.He explained why he does not believe it would bolster the stock market’s performance. Mr. Wu said, “Implementing technical restrictions in trading often makes investors feel increasingly constrained in their ability to enter and exit freely.
“Restricting information and imposing trading rules can ironically backfire. The more you restrict, the less confident investors become.”
Mr. Wu predicts that the Chinese market will ultimately plummet as some investors sell off, prompting others to do the same. “This is a classic case of herd behavior—when the leader runs, the rest of the herd follows.”
The State Council also announced its new capital-market reform measures on April 12. However, Chinese stocks reacted with a substantial selloff of small-cap stocks for two days.
Mr. Wu said that Beijing ignored the fact that stabilizing the stock market would undoubtedly require restoring confidence.
He said, “The fundamental source of confidence lies in stable policies, promising economic prospects, and avoiding constant fluctuations.”
The Problematic Party Intervention
Mr. Sun said the regime claimed the new regulations were a means to strengthen supervision and risk prevention, improve the dividend distribution system of listed companies, and promote systemic thinking and comprehensive guidance.However, behind the enactment of these measures lies the manifestation of the CCP’s political power. He said, “Its reach into the mechanisms of the entire market has deepened, exerting a more profound influence on the construction of the capital market. This involves core issues such as the admission of listings, regulation of listed companies, delisting supervision, and trading oversight.”
Ultimately, Beijing’s politics will affect the structural and institutional reform of the Chinese economy, he said.
Mr. Wu also indicated that Chinese leader Xi Jinping has extended the Party’s control over various sectors in recent years, including industrial regulation, social governance, and capital market regulation, under the guise of maintaining stability.
“His concept now revolves around instilling confidence and a sense of security through extensive regulation in every domain, from industry to society to the capital market,” said Mr. Wu.
