Chinese stocks are considered a casino, as stock price movements often have no relationship with macroeconomic factors.

By the end of last May, this irrelevance had reached its peak.

Bloomberg also said that signs in the Chinese stock market show that the current upward momentum is due to speculation and not due to good fundamental factors.

China wants to encourage growth in the stock market, as a tool for companies to raise capital.

Chinese stocks are dominated by inexperienced individual investors.

A survey on household income and assets (China Household Finance Survey) conducted by Southwest University of Finance and Economics showed that the Chinese market increased sharply thanks to inexperienced individual investors.

And this has made China’s promotional policies counterproductive.

Policymakers have been silent as the Shanghai Composite index doubled in the first seven months of the year.

But now, their attitude is gradually turning to concern as the stock market has plummeted over the past 3 weeks.

Stock 'casino' in China

Capitalization in the Chinese market reached 10,000 billion USD in mid-June.

Last weekend, PBOC suddenly reduced interest rates and required reserve ratios.

`It’s too early to call this a crisis. But the market is volatile and everyone is already thinking about negative consequences,` said Zhou Hao – an economist at ANZ.

The PBOC’s lack of transparency compared to other central banks has made its responses to financial volatility difficult.

After reducing interest rates and the required reserve ratio, `The Government deliberately used propaganda to downplay the concept of ‘saving the market’, causing the effect of these measures to be limited. They should be clearer.`

Eswar Prasad – an economist at the Brookings Institute also said that the stock market is an important tool to promote both investment and consumption, but also contains many risks.

Real estate has been approved to become collateral for investors trading on margin, borrowing money from securities companies to increase bets on the market.

`Currently, we still do not know how much and at what scale bank money is involved in unofficial margin trading. This has never happened in the history of Chinese stocks. A bubble in the market was created.

However, Zhang Bin – a researcher at the Chinese Academy of Social Sciences said that fluctuations in the stock market probably will not have a ripple effect on the financial market in general.

`The government will have to be very careful when doing this, and must clearly explain that the use of public funds is for the benefit of the whole country, not for speculators in the stock market,` he said.

Michael Shaoul – CEO of Marketfield Asset Management also said that the decline in Chinese stocks has caused him insomnia in recent days.

`But this cannot control the direction of the market anyway. They realized how limited their power was when they gradually opened the stock market. They can influence general psychology, but not