Clifford Chance

Clifford Chance Client Briefing: The impact of China's regulatory investigations following the recent stock market crash

11 August 2015

China's stock market crashed at the end of June 2015. By early July, around a thousand of the shares listed on PRC stock exchanges were suspended for trading and the A share index fell by a third in a few weeks, losing over RMB20 trillion (roughly USD3.5 trillion).

Fearful of the potential impact on the Chinese economy, PRC regulators have adopted a series of bail-out measures in a bid to stop the stock market from falling further. Some of these measures are unusual, such as asking PRC securities companies to purchase A shares with their proprietary funds and banning major shareholders and all shareholders with over 5% shareholding of a listed company from selling the company's shares on the secondary market within a period of 6 months from 8 July 2015.  In addition, the Chinese Securities Regulatory Commission (CSRC), has initiated an investigation into illegal trading activities including "malicious shorting" and market manipulation which are regarded as among the main causes of the stock market turmoil. Subsequently other PRC regulators and relevant exchanges including the PRC Ministry of Public Security (MPS), the China Financial Futures Exchange (CFFEX), the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE) are also carrying out investigations.

Foreign investors have expressed concern about the intervention of PRC regulators which appears inconsistent with the government's stated aim to "let the market play a decisive role."

Download PDF