Shanghai Stock Exchange

China's stock market heresy

China's stock market heresy

Americans believe in free markets almost as fervently as they do in God. Faith in Adam Smith cuts across religions and denominations. That is why it is so hard for many of us to accept as reasonable the Chinese government's massive intervention over the last 10 days to arrest the collapse of its stock markets. The whole endeavor — canceling IPOs, creating a fund to soak up unwanted shares, ordering institutional investors and major shareholders not to sell, suspending trading of some firms, attacking shorting stocks — is utter heresy and couldn't possibly succeed.

Chapter One of "The Book of Free Markets" states that it is impossible to fight the laws of supply...