China’s latest attempt to allow fund managers to short stocks while other countries are grappling with their more negative aspects underscores Beijing’s desire to further develop its capital markets and foster its domestic asset management industry.

The under-developed nature of China’s capital markets forces its companies to depend on banks at a time when lenders are facing constraints on lending and provides individuals with few options in the hunt for higher returns.

Banks have been safer stewards of China’s savings than the volatile stock market or property market, which is now no longer affordable for the average investor. However, given the combination of inflation – in spite of dropping recently to below 5 per cent – and regulated interest rates, depositors are now confronted with negative rates on their savings. Low returns last year fuelled an exodus from deposits into the shadow banking system with its higher returns and far higher risks.