NEW YORK — Chinese officials are scrambling to stop a plunge in the country’s stock market, shutting down half of its market from skittish investors and forcing brokerages to pony up billions to prop up shares.
The Shanghai composite lost another 5.9 percent Wednesday and is now down more than 30 percent since peaking June 12.
China’s market is largely isolated from other world exchanges, but there are worries the financial damage could hurt the broader Chinese economy, which is the second-largest in the world.
There have been signs of overheating in China for a while. Shares in Shanghai more than doubled in the past year, despite evidence the Chinese economy is slowing. At the same time, state-owned media has encouraged ordinary Chinese for months to load up on shares. Many borrowed heavily to buy stocks, taking out so-called margin loans.
Now analysts say the flood of new shares is overwhelming the market.
Originally, investors in China and abroad treated the selling as a much-needed release from a market that had soared 150 percent over the past year.
During the weekend, 21 Chinese brokerage companies announced they would create a $19 billion “market stabilization” fund and would continue to buy Chinese stocks.
The selling continued, so Chinese officials announced that major shareholders in companies and executives were banned from selling their holdings for six months.
It’s actually made things worse. The selling has not stopped, and now it is affecting Asian markets like Hong Kong and Japan. U.S. stocks also fell sharply Wednesday.
