What Is to Be Done? Possible Steps to Stem China’s Stocks Rout

China’s main stock index has lost more than a quarter of its value in less than three weeks, helping wipe out in excess of $2.5 trillion -- about ten times Greece’s gross domestic product.

Policy makers have jumped into action: The China Securities Regulatory Commission has relaxed rules on margin trading, cut trading costs and vowed to punish short-selling manipulation. The People’s Bank of China has cut benchmark interest rates and required reserve ratios, while institutional investors such as Hua Insurance Co. have made public their increased investment for A-shares. All to no avail.

So as Lenin once famously asked: “What is to be done?” Judging by tools used in the past, the following steps may be worth looking out for:

1. State Buying: The government can encourage state-backed firms to purchase shares. Indeed, there’s already speculation that Central Huijin Investment Ltd., a unit of China’s sovereign wealth fund, has been buying exchange-traded funds to bolster the market.

2. Stamp Duty Cut: In September 2008, China scrapped stamp duties on share purchases while leaving them in place for sales. The stock index shot up 9.5 percent the next trading day. Earlier that year, in April, the tax rates were cut from 0.3 percent to 0.1 percent, spurring a 9.3 percent surge.

Levies now are only charged when shares are sold. Is it really a good time to make selling a cheaper option?

3. Suspension of IPOs: In the quarter century history of China’s stock market, IPOs have been suspended a number of times, the last moritorium was from late 2012 through to December 2013. Yet the very existence of equity markets are to serve as another avenue for companies to raise funds. With policy makers from President Xi Jinping down championing pro-market reforms, is closing one avenue of fund raising still an option?

4. More Monetary Easing: The central bank has room to do more. The benchmark lending rate is 4.85 percent, well above the zero lower bound confronting many developed-world peers. Meanwhile, banks still need to lock away about 18 percent of deposits with the central bank, among the world’s highest levels.

5. Jawboning: The big guns of state media -- CCTV, Xinhua and the People’s Daily -- could rally to the cause, extolling the virtues of equities ownership.

— With assistance by Xin Zhou

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