Informative post from Prof. Chossudovsky.

Economic Destabilization, Financial Meltdown and the Rigging of the Shanghai Stock Market?
By Prof Michel Chossudovsky
Global Research
Aug 26, 2015
http://bit.ly/1IkVeiV

[snip]

The dramatic collapse of the Shanghai stock exchange has been presented to public opinion as the result of a spontaneous “market mechanism”, triggered by weaknesses in China’s economy.

The Western media consensus in chorus (WSJ, Bloomberg, Financial Times) portend that Chinese stocks tumbled due to “uncertainty” in response to recent data “suggesting a downturn in the world’s second-largest economy”.

This interpretation is erroneous. It distorts the workings of stock markets which are the object of routine speculative operations. An engineered decline in the Dow Jones, for instance, can be precipitated in various ways: e.g. short selling, betting on the decline of the Dow Jones Industrial Average in the options market, etc.

Amply documented, financial markets are rigged by the megabanks. Powerful financial institutions including JP Morgan Chase, HSBC, Goldman Sachs, Citigroup, et al and their affiliated hedge funds have the ability of “pushing up” the stock market and then “pulling it down”. They make windfall gains on the upturn as well as on the downturn. This procedure also applies to the oil, metals and commodity markets.

The Shanghai Stock Exchange Collapse

The Shanghai SSE Composite Index progressed over the last year from approximately 2209 on August 27, 2014 to more than 5166 on June 21st, 2015 (circa 140% increase); then from July 21st it collapsed by more than 30 percent in a matter of two weeks to 3507 (July 8).

A further collapse occurred starting on August 19, in the week immediately following the Tianjin explosions (August 12, 2015) culminating on Black Monday August 24th (with a dramatic 7.63 percent decline in one day).

...

The evolution of the SSE over that one year period has nothing to do with spontaneous market forces or real economy benchmarks. It has all the appearances of a carefully engineered speculative onslaught, an upward push and a downward pull...

The media consensus (as well as statements emanating from the Chinese authorities) was that Chinese financial actors rather than foreign banks could have been behind the process of stock market rigging: “Overseas investors have limited access to Chinese markets”. Market manipulation did not emanate from foreign sources, according to the Global Times.

This assessment, however, does not take into consideration that Goldman Sachs, JP Morgan Chase, HSBC et al are major financial actors within China, operating in Shanghai through Chinese financial proxies in partner joint ventures.

Moreover, these Western financial institutions are known to have played an overriding role in manipulating stock markets as well foreign exchange markets...

Financial Warfare

These engineered upward and downward swings of the Shanghai Composite Index ultimately result in the confiscation of billions of dollars of money wealth including Chinese State funds provided by the People’s Bank of China to prop up the Shanghai Stock Market. Where does the money go. Who are the recipients of this multi-billion dollar trade?

In response to the August meltdown, the People’s Bank of China “offered 150 billion yuan ($23.43 billion) worth of seven-day reverse repurchase agreements, a form of short-term loans to commercial lenders.”. This money was wasted. It did not result in reversing the meltdown of the Shanghai stock exchange.