Markets witnessed an ease from falling shares last week, raising hopes of a sustainable economy, after the Chinese government intervened to apply measures which was aimed at picking up falling share prices. However, the release of official data on Monday which highlighted a further fall in China’s industrial firms sent investor confidence sliding.
China's industrial firms fell 0.3 percent in June year on year, reversing a 0.6 percent rise in May. Upon this, the Shanghai Composite Index hit 8.5 percent at 3,725.56 while the CSI300 index climbed down to 2.6 percent, to 4,069.73 points during its morning session.
The weak data added to the fall of the world’s second largest economy, as a survey on Friday also showed that China’s manufacturing activity for July was reading at 15-month lows.
Earlier in the month Chinese regulators tightened measures by freezing share offers while setting up a market-stabilisation fund, which was aimed to pick up its fragile stock market.
However, analysts believe this could be curbing the purchase of leading stocks.
“The previous support from the government funds is apparently unsustainable,” said an analyst cited by the Wall Street Journal. He also stated that the government intervention could be implemented to “test whether the market has recovered its resilience. The government wants to use state funds to stabilize the market, not to prop it back to 5,000 point overnight.”
Meanwhile, the International Monetary Fund (IMF) warned that China must gradually loosen its support measures, Bloomberg reported, according to a person familiar with the matter.