China’s stock markets have lost nea

China’s stock markets have lost nearly $3 trillion from their peak in June. As aresult, the government has introduced new measures hoping to stop weeks ofdeclining prices.
In an effort to avoid further losses, hundreds of companies listed on China’sstock exchanges filed papers to suspend trading. By Thursday, the stocks ofmore than 1,400 mainland companies had been suspended. That is about 40percent of the market.
China’s Securities Regulatory Commission blamed thelosses partly on a “panic sentiment” and “irrationalselling.” Chinese state media have blamed short-sellers, traders who profit from falling prices, peoplespreading rumors and foreign investors. Thegovernment then put in place a number of measures tocalm the stock markets.
• The government agency that oversees the country’s biggest state-run companies has told them not to sell shares. Instead, it told them to buy more to keep the market stable.
• The country’s central bank promised to “offer (an) abundant liquidity supply for security brokers.” That means it would make loans to stock traders, called brokers, to make sure they have enough money to carry out trades.
• Chinese officials also have lent $42 billion to brokerages to buy shares. And the government moved to permit insurance companies to invest larger amounts of money in stocks.

How Chinese stocks rose in 2014
China’s stock markets rose in late 2014 after the central bank cut interestrates for the first time in more than two years. A new trading link between theShanghai and Hong Kong stock exchanges added to increased marketactivity. Higher “margin trading,” in which investors do not have to depositthe full cost of their stock trades in order to buy the shares, also fueled gains.
In the twelve months before June 12 of this year, the total value of stockstraded on the Chinese market increased by more than 150 percent.
But as the market peaked in early June, the government tightened rules onmargin trading. Investors then began to sell their holdings to protect theirprofits.
Treasury Secretary Urges Market Reforms to Continue
U.S. Treasury Secretary Jack Lew spoke about China’s answer to its stockmarket problems at the Brookings Institution in Washington last week.
He said China’s markets are not fully integrated intothe world financial system. Mr. Lew says Chineseofficials have a strong commitment to market reformswhere they have clearly set out a plan. He said thespeed at which the reforms are put in place remains aquestion.
"The question isn’t their commitment to the goal. Thequestion is the pace at which they implement it and dothey do it fast enough for it to be effective. I hope this is not something that slows down the pace of reform…They’ve got a set ofpolicies that they’ve outlined which, if they implement them, I think will makeChina’s economy much stronger in the future."
Mr. Lew said China is moving from a centralized, industrial economy to amore market-based economy powered by consumer spending. This, he said,would lead to slower more sustainable growth and improve the lives of theChinese people while lifting the world economy. He warned of slowing thereform process.
“If the reaction is to put the brakes on reforms, that will slow that process.”
Markets recover slightly
Investors welcomed the government actions to stop the decline. On Friday,Chinese stock markets regained some of the losses from the past few weeks.
However, stocks from many Chinese companies are still suspended fromtrading. Other investors believe prices may fall again once the suspendedshares resume trading.
In a report on Friday, Bank of America wrote that the stock market crashwould hit the Chinese economy in time and “will likely hurt consumption downthe road.”
I’m Mario Ritter.
VOA’s Ken Bredemeir, Steve Herman, Saibal Dasgupta, Joyce Huang andVictor Beattie reported this story. Mario Ritter adapted their reports into VOALearning English. Hai Do was the editor.