Chinese regulators are proposing the creation of a financial stabilization fund that will give the government the power to intervene in case of irrational movements in the financial market, including stocks, according to China Daily.
The establishment of the fund will be part of an amendment to the country’s Securities Law, the newspaper said.
The move comes right after a nearly month long stock market rout that saw the key Shanghai stock index shed more than 30% from its mid-June peak despite various measures adopted by the government to restore investor confidence and arrest the downward movement of equities.
China Daily wrote:
“A financial stabilization fund, known also as a buffer fund, serves as an emergency government fund to address a financial market crisis or stabilize stock prices when the market experiences an unreasonable and irrational surge or slump.”
Last week, the market finally recovered, with the Shanghai Composite Index posting its best two-day gain (July 9 and 10) since 2008.
Photo credti: Tambako The Jaguar via Flickr