China to stop intervening in the stock market?


China has stopped intervention in the stock market so far this week as policy makers debate the merits of an unprecedented government campaign to prop up share prices, according to people familiar with situation.

Some officials argue that falling stocks will have a limited impact on the world’s second-largest economy and that the costs of supporting the market are too high. On the other hand, officials who back intervention say tumbling shares pose a risk to the banking system, the people said.

The Shanghai Composite Index tumbled 15 percent over the past two days, extending a rout since mid-June that has shaken confidence among equity investors around the world. Chinese policy makers are trying to balance a pledge to loosen their grip on markets against the need to maintain financial stability amid the weakest economic expansion since 1990.

 source: Bloomberg