China announces short selling trial program

The China Securities Regulatory Commission (CSRC) announced on Sunday that it would begin a trial program allowing securities firms to engage in margin lending and short selling, the Wall Street Journal reported. The statement, made on the CSRC website, did not give a timeline for implementation. The introduction of the new investment tools – previously rumored to appear this week – is considered necessary to help the country’s stock markets develop greater stability beyond boom-bust cycles. The CSRC’s move to allow tools like short selling – which permits investors to sell borrowed stocks in hopes that prices will fall – runs counter to recent measures taken by the US, Europe and other parts of Asia to limit the practice. In those markets, some companies have blamed short selling for weakening investor confidence and exacerbating the credit crisis. The Shanghai stock market, which was closed last week for China’s National Day holiday, has fallen 56% this year.