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China provoked a collapse on its own exchanges

Shares on exchanges in mainland China and Hong Kong during trading on July 26 fell sharply to a record low this year, writes Reuters. The collapse is associated with investor's fears provoked by the tightening of regulation in the education and technology sector in the country.

The sale of shares of Scholar Education Group in Hong Kong led to a fall in the value of securities by more than 45 percent, New Oriental Education & Technology Group Inc fell by more than 47 percent after they fell by more than half in the United States on July 23. These companies offer educational services in China. The CSI Education index fell 9.61 percent to its lowest level in 16 months. The market reaction is connected with Beijing's intention to seriously complicate access to finance and work in general for companies in this industry.

China's blue-chip CSI300 index fell 3.22 percent to its lowest level since December. The Shanghai Stock Exchange composite index fell by 2.34 percent to the lowest closing level in more than two months, the Shenzhen stock exchange — by 2.28 percent. This was due to the fact that foreign investors sought to get rid of their shares. Refinitiv data shows that the outflow of funds from ordinary shares reached almost $1.4 billion on July 26.

In Hong Kong, the Hang Seng index fell to its lowest level since December 22, 2020, losing 4.13 percent. The Hang Seng China Enterprises Index of mainland companies fell 4.92 percent. Before that, it became known about new measures related to the field of technology, as well as real estate. On July 24, the authorities announced that they would force Tencent to break agreements with the owners of the rights to musical works and fined the company for unfair practices. On July 26, shares of companies in the technology sector fell, Meituan lost 13.76 percent, Alibaba Group Holding — 6.38 percent, Tencent Holdings-7.72 percent.

As for the real estate sector, according to media reports, the Chinese central bank ordered credit institutions in Shanghai to raise the mortgage rate for those who purchase their first home. It also scared off investors, the CSI 300 Real Estate industry index lost 6.13 percent, falling to its lowest level since September 2016.

Beijing's intention to seriously tighten the requirements for the work of organizations engaged in the field of additional school education became known on July 23. According to the planned reforms, companies in the sector will no longer be allowed to raise capital and enter the stock exchange, and a ban on foreign capital is also expected. The value of such companies has fallen sharply.

Beijing's actions against its own companies in recent months have already become a serious blow for local businesses. According to Bloomberg, Chinese entrepreneurs suffered multibillion-dollar losses in the first half of 2021.

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