China has attempted to head off a market downturn by banning major shareholders from selling for six months.
The move by the China Securities Regulatory Commission (CSRC) has attempted to calm the Chinese stock market, which has suffered major losses over the past three weeks, but is likely to have a severe impact on liquidity.
Holders of more than 5% of a company’s stock will be unable to sell their shares for six months, primarily impacting institutional investors. It is not expected to directly affect many international investors in China, as no Qualified Foreign Institutional Investor currently owns more than 5% of any Shanghai or Shenzen listed company.
The announcement seems to have stopped the mass sell off, with Chinese shares bouncing back by approximately 6% on Thursday, according to Reuters. Since mid-June, around 25% has been knocked off the value of Chinese shares, potentially making China a bigger risk to global markets than the Greek debt crisis.