Has Xi Jinping lost control of the markets?

ThIS YEAR investors in Chinese stocks have been on a hair-raising ride. Even as America’s S&P 500 index reached record highs, markets in China and Hong Kong shed $1.5trn in January alone. Retail investors have taken to Chinese social media to vent their frustration. So brutal was the slump that on February 6th China’s president, Xi Jinping, was reportedly to be briefed; the next day Yi Huiman, the head of China’s securities regulator, was sacked. Prices recovered a little as state firms began buying stocks. In the coming days they may rise further still.

Step back, though, and there is no mistaking the dismal bigger picture. The market value of China’s and Hong Kong’s equities is down by nearly $7trn since its peak in 2021—a fall of around 35%, even as that of America’s stocks has risen by 14%, and India’s by 60%. The decline signals a fundamental problem. Investors abroad and at home once saw China’s government as a dependable steward of the economy. Now this trust has seeped away, with severe consequences for China’s growth.