China’s market meltdown

Chinese President Xi has his hands full with a market meltdown [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. China has taken [a big step]( to manage its stock market meltdown. Regulators are telling major institutional investors they must not take net sell positions for the first and last 30 minutes of the day, effectively curbing their impact and making it easier for the “national team” of government-backed funds to influence share movements. The beleaguered equity market has lost more than $6 trillion since its 2021 peak, a symptom of the strains President Xi Jinping must manage as he rolls out a plan to revamp China’s growth model. The clampdown on quantitative trading suggests newly appointed regulatory head Wu Qing is zeroing in on cracks in the financial system that could pose a systemic risk. Similarities between China’s “quant quake” and the [2007 meltdown in the US]( ahead of the sub-prime mortgage crisis underscore what’s at stake for policymakers. The Man Group’s Ziang Fang posits it was these funds that spurred a historic crash in China’s small-cap stocks this month. For Xi, dealing with these hazards is key to an economic transformation to make growth more sustainable. Such moves by the regulator are making the costs of these efforts clear: sidelining major asset managers and distorting prices risk undermining a years-long push to create efficient markets that are integrated with the global financial system. For now, [drastic measures to halt the selloff]( are working. Stocks are at their highest levels in weeks. But artificially buoying markets can’t disguise the tough reality many are facing. Nearly a third of office workers reported [their salaries are falling](, while protests related to economic issues picked up pace toward the end of last year. China’s middle classes are feeling gloomy about their prospects. Until that changes, Xi will have his hands full. —[Rebecca Choong Wilkins]( Commuters at a subway station in Shanghai on Monday. Photographer: Raul Ariano/Bloomberg Global Must Reads Israel’s military has been ordered to come up with a plan to [move Palestinian civilians]( from Rafah before an assault on the Hamas-held Gaza city, Prime Minister Benjamin Netanyahu said in a telephone interview. Officials privately acknowledge they have no precise strategy about how to do it, how long it will take nor where 1.2 million people, many living in tents and on streets and facing hunger, will go. Ukraine is near an agreement to get the next $900 million disbursement from its $15.6 billion loan with the International Monetary Fund, a boost to the [nation’s war-ravaged budget]( as more than $60 billion of US aid remains tied up in Congress. Kyiv expects to reach an accord with IMF staff as soon as today, though the agreement would still need ratification by the fund’s executive board. The Joe Biden administration is considering executive action to tighten immigration rules after House Republicans balked at a bipartisan Senate agreement, sources say. The situation on the southern border is a growing issue in the November US elections and [has become key to the president’s goal]( of winning congressional approval of aid for Ukraine as its forces contend with a new Russian offensive. Migrants pass through concertina wire into El Paso, Texas, on Feb. 8. Photographer: Justin Hamel/Bloomberg Railways, health care, education and government departments are among the areas disrupted as Argentina’s [labor unions ramp up protests]( against austerity measures imposed by President Javier Milei’s administration to tackle chronic inflation. Milei is anticipating stiffening resistance to his shock therapy approach in March and April after the South American summer ends and the school year begins, traditionally bringing with it new costs. South Africa’s finance minister delivered a budget yesterday that provided for [vote-grabbing spending increases]( three months before elections and a plan to contain debt that cheered investors. The loosening of the public purse strings to boost health and security, as well as welfare, after several years of cuts is a boon for the African National Congress that’s at risk of losing its parliamentary majority for the first time in 30 years. Biden called Russian President Vladimir Putin a “crazy SOB” and criticized Donald Trump [for likening himself]( to opposition leader Alexey Navalny, who died last week in an Arctic prison. China said it will renew its “Panda Diplomacy” with the US and other nations after spending recent years [bringing the bears it loans]( to foreign zoos back home. The younger brother of Cambodian Prime Minister Hun Manet was appointed deputy premier in [the family’s latest move to consolidate]( its long-held grip on the Southeast Asian nation. Washington Dispatch A US congressional delegation met with Taiwan’s leaders today during a visit to the island that could [intensify cross-Strait animosities]( and perhaps strain an improving relationship between Beijing and Washington. “The United States stands with Taiwan,” Representative Mike Gallagher, a Wisconsin Republican and leader of the delegation, said in a statement. Gallagher, who chairs the House committee on the Chinese Communist Party, has called for bolstering the island’s defenses and curbing US economic ties with China. The lawmakers’ arrival comes at a tense moment: Two Chinese fisherman died last week when their speedboat capsized as they were being pursued by Taiwan’s Coast Guard. China then stepped up patrols near a Taiwanese island. China tends to react to visits by American lawmakers by deploying warplanes and ships around Taiwan. The People’s Liberation Army held intensive drills and fired missiles over the island following then-House Speaker Nancy Pelosi’s trip to Taipei in August 2022. Beijing also cut off high-level military communications with the US. An agreement to restore them came about during last year’s meeting in California between Biden and Xi. One thing to watch today: Existing home sales data for January will be released by the National Association of Realtors. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 5pm ET weekdays on Bloomberg Television. Chart of the Day The world is losing the [fight against malaria](, a disease that has a devastating toll in Asia and Africa and is showing up in developed countries including the US. Anna Edney and Michelle Fay Cortez report how a decision taken by one of the world’s biggest manufacturers of bed nets more than 10 years ago has exacerbated the situation. And Finally Washington is gambling on a $2.3 billion rail project linking the Democratic Republic of Congo and Zambia in Africa’s copper-flush heartland to Angola’s Atlantic coast to provide the battery metals to [power its green transition](. The 2,600-kilometer (1,615-mile) project is the single biggest move by the US to counter China’s dominant position over the market for critical metals in Africa. WATCH: Matthew Hill explains how the US and Europe are trying to catch up with China’s massive investment in sub-Saharan Africa. Source: Bloomberg More from Bloomberg - [India Edition](, an insider’s guide to the emerging economic powerhouse, and the billionaires and businesses behind its rise - [Next Africa](, a twice-weekly newsletter on where the continent stands now — and where it’s headed - [Business of Sports](, delivering the context you need on the collision of power, money and sports - [Economics Daily]( for what the changing landscape means for policy makers, investors and you - [Green Daily]( for the latest in climate news, zero-emission tech and green finance - Explore more newsletters at [Bloomberg.com](. Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. If a friend forwarded you this message, [sign up here]( to get it in your inbox. [Unsubscribe]( [Bloomberg.com]( [Contact Us]( Bloomberg L.P. 731 Lexington Avenue, New York, NY 10022 [Ads Powered By Liveintent]( [Ad Choices](