Eyebrows raised as China tightens grip on its financial markets

 Eyebrows raised as China tightens grip on its financial markets

China is resorting to increasingly forceful measures to contain risks to the financial system, in moves that threaten to undermine President Xi Jinping’s pledge to give markets greater freedom.

Authorities have in recent weeks ordered state firms to curb their overseas commodities exposure, forced domestic banks to hold more foreign currencies, considered a cap on thermal coal prices, censored searches for crypto exchanges and effectively banned brokers from publishing bullish equity-index targets. A new rule will bar cash management products from holding riskier securities and limit their use of leverage.

The moves have raised scepticism over President Xi Jinping’s pledge to give markets greater freedom.Credit:Getty Images

While the measures fall short of direct intervention, they risk reinforcing the notion of moral hazard. If traders know authorities are likely to step in to limit gains or losses in an asset class, they can bet…

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