China Halts Equity Support

China has halted 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, said one of the people, who asked not to be identified because the deliberations are private. Officials who back intervention say tumbling shares pose a risk to the banking system, the people said.

The Shanghai Composite Index sank 15 percent over the past two days, extending a $4.5 trillion 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.

The China Securities Regulatory Commission didn’t immediately respond to faxed request for comment. On Aug. 14, the CSRC said China Securities Finance Corp., the state agency tasked with supporting share prices, would no longer add to equity holdings unless there’s unusual volatility and systemic risk.

Bloomberg

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