From the concerted wooing of international investors to doing just about everything in its power to keep them out

THE ups and downs of China’s stockmarket have become plainly, painfully visible to the world. Less transparent, but perhaps more damaging in years to come, has been another kind of rollercoaster. The government has gone from the concerted wooing of international investors to doing just about everything in its power to keep them out. That of course is not China’s intent. Its goal is to stabilise share prices and, to that end, it still welcomes cash from abroad. But the cumulative result of its interventions in recent weeks has been to scare away investors. China’s stockmarket has never been for the faint of heart. Big, inexplicable swings in share prices are bad enough. The regulatory labyrinth that foreigners have to navigate just to earn the privilege of joining the fray has long been even more forbidding. But over the past year it looked like China was finally getting serious about opening its stockmarket to the world.

A new trading link meant that, in theory, any foreigner with a brokerage account in Hong Kong could invest in mainland stocks. China also addressed a series of foreign investors’ long-standing complaints: it cleared up confusion about its capital-gains tax; made it easier to short individual stocks; and developed index futures, a vital hedging tool. Chinese officials met with institutions in New York, London and Frankfurt, encouraging them to apply for investment quotas. FTSE Group, which creates stock indices for funds to track, launched a transitional benchmark that, for the first time ever, included Chinese domestic shares. China’s stockmarket was clearly still immature, the evidence in its rapidly swelling bubble, but regulators seemed committed to building a healthier, more professional market.

The bursting of the bubble has, in dramatic fashion, undermined this progress. In the first days, the immaturity of China’s policymakers was on display for all to see. Panicked at the sell-off, they used central-bank funds to prop up share prices and ordered state-owned companies to buy back shares. However, it is the use of law as a cudgel, wielded with increasing force in recent days, that has been most alarming to investors.