That bet isn’t going so well. Mainland equities just entered their first bear market since Donald Trump’s trade war. Shares in Hong Kong had their worst week in five months, with short sellers feasting like never before. Credit-market contagion is spreading to some of the strongest property developers for the first time. Assets that were previously resilient like China’s currency and government bonds are no longer immune, with the yuan turning the most volatile since August.
While it’s still only January, mounting losses are testing the ability of policy makers in Beijing to support markets after the chief securities regulator vowed to “firmly” prevent volatility. It’s also confounding those on Wall Street who predicted easier policy out of Beijing would be the catalyst needed to revive Chinese beaten-down assets. Authorities have cut interest rates and pledged to do more to support the economy.