China’s efforts to stem the collapse of local stock markets, which have already reached a staggering $7 trillion, are reminiscent of the 2015 crisis, when Beijing took drastic measures to avoid a total meltdown.

This time, however, the problems have much deeper roots, investors say, according to Bloomberg.

Authorities have gone into crisis mode to prop up China’s free-falling markets, clamping down on short sellers and generating cash for banks as sovereign wealth funds step up stock market buying.

Another signal that Beijing is really worried is that it abruptly fired stock markets head Yi Huiman on Wednesday, using another method from the “playbook” used a decade ago when the next big crash happened.

In his place was appointed Wu Qin, who was nicknamed the “broker killer” for the severity with which he dealt with players in the financial markets.

“A turning point that has not been seen in recent decades”

“This change demonstrates that the political momentum remains for strengthening administrative measures rather than addressing the fundamental problems facing the economy,” Eurasia Group analysts wrote in a note after the surprise reshuffle.

But instead of helping, “it increases the sense of unease and affects (investors’) confidence,” Eurasia Group experts explained.

“The real reason things are different this time is that the growth narrative has changed,” said Fan Rui, fund manager at Shanghai WuSheng Investment Management Partnership.

“We are now at an inflection point not seen in decades,” he added.

A $7 trillion collapse is not the worst news in China

Even economists struggle to understand just how bad the $7 trillion collapse in China’s stock markets is. The best comparison in terms of volume would be that as of 2021, the market will lose the combined GDP of Japan and France, Forbes notes.

And that’s not even the worst news to come out of Asia’s largest economy.

No, we’re not referring to China’s deflation, which is deepening at the fastest pace in decades, the publication notes. As well as the fact that “China Evergrande” is a hot topic again.

It’s a war that Xi Jinping’s inner circle seems to be waging against the worst news.

Last week, the Ministry of State Security announced that Beijing is hunting down those who spread negative views about China’s economic and market prospects. This dire warning not to “demean China’s economy” with “false narratives” is a mark of Mao Zedong, not Adam Smith, Forbes notes.

And that raises troubling questions as China’s influence in the world grows.

China’s top intelligence agency has made clear what has largely been implied until now, that it will prioritize “strengthening economic propaganda and managing public opinion.”

The stock market is collapsing, reaching a 5-year low

The Beijing government recently replaced Yi Huiman as chairman of the China Securities Regulatory Commission (CSRC) with Wu Qing, Reuters also noted.

No reason was given for Yi’s removal as China’s stock markets hit five-year lows and retail and institutional investors rushed to sell to cut losses.

Which is not surprising, given that China’s economy is in dire straits and the lack of strong government stimulus measures is having a negative impact on market confidence.

Numerous market-oriented support measures, such as curbs on short selling or cutting trading costs, have failed to stem the sell-off in stocks, along with a series of government announcements promising support measures.

A “distinguisher-broker” was involved.

Yi’s firing and Wu’s replacement came just before the long Chinese New Year break from February 9 to 16.

Stocks edged higher on Thursday ahead of a stock market holiday, but the weak recovery came after China’s stock markets lost 1 trillion in listed company capitalization in less than two weeks in early February.

“I can understand how the knee-jerk reaction, how (Wu’s involvement) can be seen as something positive. But it does absolutely nothing to address the well-known problems of the Chinese economy,” said Tim Graf, head of EMEA macro strategy at State Street.

“Wu is called a ‘disruptor,’ so we expect strict regulation,” said Yang Tinggu, deputy chief executive of Tongheng Investment, adding that he expected some brokerage firms and individuals to be punished for undermining the market.

Foreigners have been selling shares continuously for six months

Foreign investors sold a net 18.2 billion yuan ($2.5 billion) of Chinese stocks last month, marking the sixth straight month of shrinking portfolios.

While global stocks rose 20% last year, gold 13% and bitcoin 155%, China’s benchmark CSI300 fell 11%.

It has been in the red for 6 months in a row and has fallen 23% since August, reaching a five-year low.

China’s stock markets have seen near-constant turbulence since 2019, first over a trade dispute with Washington and then the collapse of over-indebted property developer China Evergrande amid a crisis that has rocked the country’s housing market.

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