China’s Searching for Stock Market Scapegoats

“They don’t quite get how to work with these markets, don’t know what they’re doing”

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By Ye Xie and Gabrielle Coppola

September 3, 2015 at 12:17 AM UTC

This article is for subscribers only.

This article is part of the September 7, 2015 issue of businessweek.

To commemorate the 70th anniversary of Japan’s World War II surrender, China planned a 12,000-soldier march down Beijing’s Chang’an Jie—Eternal Peace Street—on Sept. 3. For President Xi Jinping, it was a chance to project an image of calm, order, and strength. Unfortunately for Xi, China’s financial markets are sending a completely different message.

Since the stock market started melting down in mid-June, wiping out $5 trillion in shareholder value, the government has tried a series of increasingly desperate measures to halt the slide. The latest looked like an attempt to shift blame: In a campaign to crack down on alleged market manipulation, it arrested executives at Citic Securities, China’s largest brokerage, an employee of the China Securities Regulatory Commission, and a journalist at Caijing, a business magazine.