The Chinese state unleashed a bit of a monster by encouraging its savings-rich population to buy stocks as the economy recovers from its coronavirus-induced contraction. A July 6 front-page editorial in the officially sponsored China Securities Journal extolled the virtues of a “healthy bull market” at a time of “complicated” international relations. That was enough to send mainland indexes up 7% and rekindle bad memories of 2014-15, when domestic A-shares more than doubled in seven months, then plunged 40%.

But Beijing quickly signalled that it had learned its lesson from that wrenching cycle. The following day, the Securities Journal clarified that equity valuations should be “reasonable.” Two official actions promptly followed, notes Wenli Zheng, a portfolio manager for Asian small-cap stocks at T. Rowe Price. Securities regulators tightened margin requirements for certain brokerages, while the People’s Bank of China hinted at tapering pandemic-related monetary stimulus. Zheng expects “total social financing” growth to cool from more than 16% year over year to 11%-12% over the next few months, tightening liquidity for all kinds of investment.