In late September, China’s stock market, beleaguered by weak economic indicators and a crumbling property sector, experienced an unexpected rally. After previous hesitation over major interventions, Beijing’s stimulus measures sparked a surge in Chinese equities, briefly reigniting optimism. Yet what truly puzzled market observers was Beijing’s newfound approach to managing the market itself.
After allowing the market to lose trillions of dollars in value, with only limited state fund interventions when key psychological benchmarks were breached, Beijing abruptly shifted to a full-scale rescue. This involved forward guidance through press conferences, policy adjustments, and media engagements to restore market confidence. For the first time, stock market performance appeared to be a direct policy target—marking a sharp departure from President Xi Jinping’s usual stance of keeping financial markets at arm’s length.
In late September, China’s stock market, beleaguered by weak economic indicators and a crumbling property sector, experienced an unexpected rally. After previous hesitation over major interventions, Beijing’s stimulus measures sparked a surge in Chinese equities, briefly reigniting optimism. Yet what truly puzzled market observers was Beijing’s newfound approach to managing the market itself.
After allowing the market to lose trillions of dollars in value, with only limited state fund interventions when key psychological benchmarks were breached, Beijing abruptly shifted to a full-scale rescue. This involved forward guidance through press conferences, policy adjustments, and media engagements to restore market confidence. For the first time, stock market performance appeared to be a direct policy target—marking a sharp departure from President Xi Jinping’s usual stance of keeping financial markets at arm’s length.
Xi has long prioritized what he calls “real” sectors—manufacturing, technology, and infrastructure—over speculative financial activities. Why the sudden interest in stock market management?
And if Xi is intent on fostering a bull market, why are we seeing only incremental measures rather than sweeping fiscal or consumption-driven stimulus? The answer lies in Xi’s vision of the stock market: not as a tool for exuberant growth but as a carefully managed mechanism that aligns with China’s broader economic and political objectives.
Xi’s wariness of financial markets is rooted in the 2015 stock market collapse. China’s market had soared on the back of speculative frenzy and margin lending, only to implode spectacularly that summer, wiping out trillions of dollars in value. Although stock market participation in China remains comparatively low, it was retail investors—the smaller players who dominate China’s A-share market—who bore the heaviest losses. The concentrated impact on these individual investors turned the financial collapse into a political crisis, casting a long shadow over Xi’s leadership.
Central to Xi’s economic philosophy is a skepticism toward speculative excess. After the crash, according to reporting in Lingling Wei and Bob Davis’s book Superpower Showdown, Xi confronted Xiao Gang, then-chair of China’s financial regulatory body, pointing to a cover of the Economist that depicted Xi struggling to prop up the market. Rumors circulated within Beijing’s elite circles that Xi suspected elements within the financial sector of orchestrating the collapse to undermine his authority.
The crash........