Timeline: China’s intervention in the stock market

SHANGHAI (BestGrowthStock) – China’s modern stock market of nearly 20 years is well known for repeated government intervention to help prop up or depress share prices — a legacy of its state planning economy that had prevailed until recently.

Here are milestones and interventions in the market so far.

December 1990 – The Shanghai Stock Exchange begins operating and the benchmark Shanghai Composite Index (.SSEC: ) is launched with a base of 100 points. It hits its all-time low of 90.

April 1991 – The Shenzhen Stock Exchange (.SZSC: ) is set up.

May 21, 1992 – The index scores its biggest single-day rise of 105 percent as the exchanges lift a 5-percent limit for stocks’ daily price movements and allows free trading as a sign of government support to the market.

February 16, 1993 – The index hits a historical high of 1,558. It will not return to that level for more than six years, mainly because of disagreement within the Communist government over whether a stock market is a capitalist product.

March 1994 – Regulators suspend IPOs after the index sets repeated record lows. From April 1993 to July 1994, the index falls about 75 percent on the weight of heavy new share issues as the government uses supply to keep the market under control.

May 1995 – Beijing orders a halt to treasury bond futures trading after a major price rigging scandal in February 2005. China has no financial derivatives for a decade from then.

December 16, 1996 – The Communist Party newspaper, the People’s Daily, runs an editorial warning against “excessive speculation” in stocks after the index jumped 86 percent in the first 11 months of the year. A two-and-a-half-year bear market begins.

December 1996 – The exchanges set 10-percent daily limits for share price movements to clamp down on excessive speculation. The limits have been in place ever since.

2000 – Shanghai becomes the world’s best-performing major equity market, up 51 percent on the back of official reforms such as approvals for the creation of many mutual funds.

July 14, 2001 – The index hits a historical high of 2,245. That evening, regulators issue rules ordering listed firms to sell some state shares in IPOs and additional share offers, and give the money to the national pension fund. The order sparks a four-year market slump in which the index loses half its value.

May 2005 – The China Securities Regulatory Commission (CSRC) suspends IPOs to ease fears that too many shares will flood the market as the government conducts a reform to sell state shares.

May 2006 – The CSRC announces resumption of IPOs after a slew of new regulations to improve market transparency and encourage qualifying firms to list domestically. The market begins a quicker pace of rises.

May 29, 2007 – The Ministry of Finance announces at midnight an immediate rise in China’s stock trading tax to 0.3 percent from 0.1 percent to cool the market, which has risen more than 50 percent so far in the year. The index falls 21 percent by June 5.

July 26, 2007 – The index reverses and resumes posting record highs, boosted by stronger-than-expected earnings estimates.

September 2007 – Regulators pump a record monthly volume of 149 billion yuan in IPOs into the market to dampen heated trading.

October 2007 – The index stages a sixfold surge since mid-2005. It hits an intraday record high of 6,124 on October16, 2007, marking the all-time peak for the market up to now.

2008 — The index plunges 65 percent to become the worst performer among the world’s major stock markets. The government takes a slew of steps to halt the market’s slide as the global financial crisis slows China’s economy (Read more about the fastest growing economy.) significantly.

April 24, 2008 – The index surges 9.3 percent after the government cuts the stock trading tax back to 0.1 percent.

September 19, 2008 – The index soars 9.5 percent after an unprecedented package of official steps to support the market, including government purchases of stocks in major state-owned banks. The government has also shifted to monetary easing from tightening.

October 2008 – The CSRC quietly suspends stock IPOs. The index falls to 1,664.925, a 25-month low.

November 2008 – The government announces a 4 trillion yuan ($590.2 billion), two-year economic stimulus plan to curb the economy’s slowdown.

2009 – The market begins to revive, leaping 80 percent in the year. The CSRC resumes IPOs in June to help slow the rally.

2010 – The index plunges 27 percent in the first half of the year partly under the weight of abundant new share supply, including IPOs. The market is also hit by tighter bank lending and a government clampdown on sky-high property prices, but these measures are not directly aimed at stocks.

($1=6.777 Yuan)

(Reporting by Lu Jianxin and Jacqueline Wong)

Timeline: China’s intervention in the stock market