Chinese equities Aren't markets manipulated on the way up?

CHINA'S stockmarket sell-off continues, with the Shanghai Composite sell-off reaching 10% in a week and approaching 30% from the peak. Somoene must be to blame and the authorities are investigating "market manipulation" with some short-selling accounts suspended</a></strong>. Earlier this week, measures were announced to prop up the market, including a proposal to allow traders to pledge their houses in margin accounts</a></strong>; one of the craziest ideas ever announced. What next? Pledge your kidneys on commodity futures?

In this, China follows a long, ignoble western tradition of blaming short-sellers when things go wrong. In fact, there was a sudden bubble</a></strong> in Chinese stock prices, fuelled by margin buying; prices are now returning to normal. Short-sellers can act to deflate bubbles by betting against the trend but their activities are often restricted and, much of the time, it is an unprofitable business; to survive, they need to make money in bear markets. Stopping them is a form of market manipulation in itself. And it means there will be fewer shorts around, and more scope for future bubbles.