Retail investors check share prices at a brokerage in Qingdao, Shandong province, on Aug 18. The benchmark Shanghai Composite Index plunged by 6.15 percent to close at 3,748.16 points.
Share prices plunged on Tuesday as jittery investors resorted to huge sell-offs on concerns that the government has halted its plan to buy equities to stabilize the market.
The benchmark Shanghai Composite Index sank by 6.15 percent, or 245.5 points, to close at 3,748.16. It was the biggest loss in three weeks since an 8.5 percent dip on July 27.
State-owned enterprises, which are expected to undergo major ownership reforms, led the decline with more than 1,600 stocks on both the Shanghai and Shenzhen bourses tumbling by the 10 percent daily limit.
The market slump came after the country's securities regulator said on Friday that the State-owned margin lender China Securities Finance Corp will not step into the market unless there are abnormal market fluctuations.
The regulator's announcement has been widely interpreted as a signal that the government is ending its direct intervention and letting the market mechanism play a bigger role after the benchmark rebounded by about 15 percent from a bottom on July 8.
But Tuesday's decline underscored that investors' sentiment remained fragile as a slowing economy and the depreciation of the yuan continued to weigh on the market.
Jiang Chao, an analyst with Haitong Securities Co, said that the monetary authorities appear to be in a dilemma over the easing policies and the monetary uncertainty may continue to destabilize the market.
"There is need to inject more liquidity as the depreciation of the yuan is likely to trigger capital outflows. But the market rescue efforts have led to a surge in the broad monetary supply which created a policy dilemma," he said in a research note.
The recovery of the country's home prices has also dimmed investors' expectation for further monetary easing, some analysts said.
Li Daxiao, chief economist at Yingda Securities Co, urged investors not to overreact to Tuesday's decline, but warned about the risk of excess valuations of companies in the military industry.
Share prices of listed military-related companies have ballooned substantially ahead of the country's military parade commemorating the end of World War II and on expectations of major reforms.
The average valuation of the industry has been ranked the top among all industries with the price-to-earnings ratio of most companies exceeding 100 times, according to estimates.
"There is a big risk of the bubble bursting in military-related stocks, which is even worse than the startup board," Li said.
Chinese shares bounced back from early morning losses and closed sharply higher on Tuesday following a nightmarish two weeks.
After a two-week tumble, China stocks surged on Tuesday as a series of government measures bolstered investor confidence.
The CSI 300 Index, which monitors share prices of the largest companies listed in Shanghai and Shenzhen, jumped by 6.7 percent to 4,473.00 points, while the Shanghai Composite Index gained 5.6 percent to 4,277.22 points, the highest daily gain since 2009. The Chinese A-share market has fallen by about 20 percent from its peak in mid-June.
A series of measures to maintain market confidence have been introduced since Friday, including draft rules to allow pension funds to buy stocks, funds and equity-backed pension products.
That could channel more than 1.5 trillion yuan ($242 billion) into equity-backed investments, including about 15 billion yuan directly into the A-share market, Shanghai Securities News reported.
Pension funds may not be allowed to buy stocks before the end of this year, according to the draft rules, but investor confidence has been bolstered by the news, pushing up sentiments in the A-share market, researchers said.
"Although the pension funds may not help the A-share market in the short term, the draft measure, along with the recent cuts in the reserve requirement ratio and interest rates, show intentions to stabilize market incentives," a research report by Haitong Securities said.
The country's fund association said the falling prices presented valuable buying opportunities and it urged hedge fund managers to make rational investment decisions.
"Confidence is more important than gold," the Asset Management Association of China said on Tuesday. "Sunshine always follows rainy days," it added.
Brokerage firm Guotai Junan Securities said it would lower margin requirements for certain blue chips to lever-age investment values.
Leading asset managers echoed the sentiments to convince investors that the bull market was not yet over.
Managers of private equity funds also stated that they believe the market will continue to be bullish.
"From a mid-to long-term perspective, the foundations of the bull market have not been shaken. Instead, they have been consolidated amid corrections, and the market will be bullish in a more stable and lasting manner. We believe it is a rational decision and good timing for value investing," said Wang Yawei, president of Shenzhen Qianhe Capital Management.
Technology companies and brokerage stocks rallied on Tuesday, with an average rise of the sectors reaching about 8 percent.
Mainland stock markets tumbled in late afternoon trading Thursday as investors cashed in on gains from earlier in the day.
The Shanghai Composite Index fell 3.46 percent or 162.37 points to 4,527.78 points Thursday. The Shenzhen Component Index lost 3.80 percent or 619.87 points to close at 15,692.44 points.
The CSI 300 Index of the biggest companies traded in Shanghai and Shenzhen fell 3.56 percent or 173.61 points to 4,706.52 points.
A total of 1.55 trillion yuan ($249.71 billion) changed hands on the two bourses, up from the previous trading day's 1.49 trillion yuan.
News about the central government's decision to scrap the debt-to-loan ratio for banks sent heavily weighted financial stocks soaring during morning trading, pushing the Shanghai benchmark above the 4,700 point mark by midday.
However, in the afternoon session, banking heavyweights took a hit as cautious investors decided to take some profit, dragging down the Shanghai index.
Despite the good news about the debt-to-loan ratio, the banking sector still suffered losses, indicating weak investor sentiment, New Times Securities said in a note Thursday.
The regulatory approval of a new batch of IPOs may have also contributed to the fragile sentiment.
The China Securities Regulatory Commission said late Wednesday that it has approved 28 new IPOs, which media reports said would freeze more than 1.4 trillion yuan.
The coal and nonferrous metal sectors were among the worst performers Thursday. Gansu Jingyuan Coal Industry and Electricity Power Co, Shaanxi Coal Industry Co, Anhui Jingcheng Copper Share Co and Shenghe Resources Holding Co fell 9.46 percent, 9.04 percent, 9.45 percent and 9.20 percent, respectively.
ChiNext, the country's NASDAQ-style board for high-tech and emerging start-ups, slumped 5.23 percent or 177.02 points to close at 3,206.38 points.
Japanese fashion manufacturer and retailer UNIQLO opened its first store in Ma'anshan City in east China's Anhui Province earlier this year, thanks in part to China's campaign to streamline administration.
With the help of a local subdistrict office, Fast Retailing (China) Trading Co., Ltd. managed to obtain a business license, despite lacking an important document.
"We needed the department store's certificate of title for our business license before making orders and employing people. However, the construction work was not done yet and we didn't have much time to wait," said Qiang Lili, a manager with the company.
The company went to the city's government affairs service center for help and learned that Ma'anshan had just launched a new regulation simplifying business location registration.
According to the new rule, which went into effect on December 31, 2014, those who temporarily lack the certificate of title for business license applications can submit proof of location from the local subdistrict office instead.
"We know the streamlining campaign is going on and we experienced the convenience this time. It's encouraging," said Qiang.
In addition to making business registration easier, Ma'anshan has also shortened the vetting period for investment projects. For example, the approval time for industrial projects was slashed from more than 30 to just 17 days.
"Foreign investors came for business opportunities, but the better government affairs services gave us more confidence," Qiang said.
In the first quarter of this year, Ma'anshan City's utilization of foreign direct investment reached 347 million U.S. dollars, up 12.8 percent year on year.
Similarly, foreign direct investment in other provinces also achieved steady growth in the first quarter of this year.
In Hubei, utilization of foreign investment hit 2.24 billion U.S.dollars, up 10.1 percent year on year. In Jiangxi, utilization of foreign investment reached 2.21 billion U.S. dollars, up 10.3 percent, and in Tianjin, it hit 6.37 billion U.S. dollars, up 10.5 percent.
Since 2013, China's State Council has been streamlining government administration to reduce government control and unleash market vitality.
In two years, more than 700 approval items controlled by central government departments have been canceled or delegated to lower agencies, more than a third of all approval items handled by the State Council prior to streamlining.
Following the steps of the central government, local administrations also explored ways to simplify the approval process and lower the threshold for investment.
On May 12, Chinese Premier Li Keqiang again called for more efforts to streamline administration procedures at a national teleconference attended by senior and mid-level officials.
Li said the government will cancel more approval items, make business registration easier and waive administrative charges it deems unreasonable this year.
"It is a positive trend," said Wang Yukai, a professor from the Chinese Academy of Governance. "But to create a better foreign investment environment in the long run, the government management system should also be improved."
China's first funding program aimed at providing finance exclusively to female entrepreneurs has been launched by a group of heavyweight finance organizations.
International Finance Corporation, Ant Financial Services Group, a subsidiary of Alibaba Group Holding Ltd, and Goldman Sachs Foundation will jointly run the program.
The funds to be offered - through loans from Ant Financial Services' microcredit arm Ant Credit, with the backing of IFC and Goldman Sachs - are expected to benefit around 46,000 female entrepreneurs. The program has 500 million yuan ($80.13 million) available to it.
"The market opportunity for financial products designed specifically for female entrepreneurs is huge", said Ji Min, deputy director of finance research institute of the People's Bank of China, with few, if any, currently on the market.
Karin Finkelston, IFC's vice-president for Asia Pacific, said women starting out tend to invest their business knowhow in different directions from their male counterparts, for instance into family-oriented fields, including children's education and family healthcare, which often represent appealing prospects for financial companies.
On the flipside, however, research shows that women entrepreneurs have traditionally found it hard to get financed, and if they do, the amounts approved can be tiny, even as little as 10 percent of what they are seeking, said Finkelston.
She claims her own organization, however, is female-friendly when it comes to financial support, a philosophy shared with its partner in the new fund, Ant Financial Services, which already has a strong client base of female-led startups, many of which run their businesses on Alibaba's online market platform.
Yu Shengfa, Ant Financial's vice-president, said that just over half of the business owners using Alibaba's online market platforms are female.
IFC provided 1 billion yuan in senior loan funding to Ant Credit in 2014 which it loaned, in turn, to 62,000 micro-, small and medium-sized enterprises across China.
Online-based Ant Credit's role is to evaluate potential borrowers' creditworthiness based on their transactional and behavioral data, without the need for deposits, it says, or using any assets as guarantees.
By the end of March 2014, Ant Credit had loaned 190 billion yuan for more than 700,000 small and micro-business.
Ding Qinyan, 26, an Ant Credit customer, started her online apparel store on taobao.com when she was still in college.
Her first online business loan was granted in 2013, for the deposit needed to join an online sales campaign.
Based on Ding's sales records and credit history, the application was approved within a minute at an interest rate of 0.0005 percent per day.
Foreign banks in the Chinese mainland continue to be optimistic about their future performance going forward, according to a report released by Ernst & Young Greater China here on Tuesday.
"The regulatory landscape continues to challenge foreign players, while alongside are also the opportunities generated from the evolving RMB internationalization and interest rate liberalization," Managing Partner of Financial Services at Ernst & Young Greater China Jack Chan said.
In terms of total assets, based on the China Banking Regulatory Commission's 2013 annual report, foreign banks' market share in China was just 1.73 percent as of Dec. 31, 2013, below the market share of 1.84 percent back as of Dec. 31, 2004.
According to the report, foreign banks in China expect a modest improvement in performance over the next three years. Half of the participants predict a slight improvement, while 45 percent of them hope to see a significant improvement.
Despite the optimism, the report said many of the CEOs that they have surveyed find the market challenging and complicated by issues surrounding financial reform and economic uncertainty.
The most difficult regulatory challenge in 2014 was access to the bond market, followed by the myriad of rules and regulations and capital and liquidity constraints, Chan said.
As China's economy evolves, the foreign banks believe it is critical that the capital markets open up and the foreign banks participate more fully in the bond market, he said.
The report is based on interviews with 41 foreign bank CEOs and senior bank executives based in Shanghai, Beijing and Hong Kong and conducted during August and September 2014.
It examines the challenges facing players as they push to improve their footprint in China. It also looks at the trends and regulatory reform that is shaping the market and offer insights into ways of driving growth now and in the future.
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