China regulator tightens curbs on short selling

The news: China's securities regulator has announced further measures on the lending of securities as part of ongoing efforts to curb short-selling.

The numbers: The measures come after China's stock market hit a fresh five-year low last week as confidence wanes in an ailing economy. Recent efforts to curb short-selling have led to a 24% drop in securities lending business, the China Securities Regulatory Commission said.

The context: The regulator said late on Tuesday it would suspend brokerages from borrowing shares for lending and cap the size of the so-called securities re-lending business. It will also ban securities lending to investors who sell stocks on the same day of purchase, and vowed to crack down on illegal arbitrage using short-selling. No new business would be allowed for securities re-lending, in which brokerages borrow shares and lend them to clients for short selling, while existing businesses would be gradually wound up, the CSRC said.

China's stock market tumbled in 2023 and has extended its slide in the new year amid relentless selling by foreign investors. The world’s second-largest economy grew 5.2% for 2023 but the comparison was flattered by a weak, lockdown-hit 2022 and the recovery has been highly uneven.