Goldman Sachs CEO and Chairman Lloyd Blankfein told The Wall Street Journal Editor Gerard Baker last week that China's broad stock market intervention was "ham-handed" and "sloppy", and he "would not invest in China right now". In the past three months according to Goldman Sachs, China’s government has spent 1.5 trillion yuan ($236 billion) trying to prop up its stock market, as the Shanghai Stock Exchange tumbled 39.04% from its June high of 5178.19 to the Monday close of 3156.54, 

Mr. Blankfein may be right as Beijing has been trying several unorthodox measures to put a floor on China’s stock markets, including restrictions in short-selling and liquidity injections by the People’s Bank of China (PBoC) to the government-owned margin lender China Securities Finance Corp (CSFC) so that the CSFC can give credit lines to 21 brokerage houses to purchase Chinese equities. China's regulators also relaxed the margin trading rules by allowing real estate as an acceptable form of collateral for Chinese margin traders, meaning individual investors who pledge their homes could be at risk of losing them to a broker if share prices fall enough.

The economic news from China has been mixed of late, as the National Statistics Bureau said last week that China’s fixed-asset investment rose 10.9% in the first eight months, missing the median forecast of 11.2% from economists surveyed by Bloomberg. China industrial production came in at a 6.1% gain year-on-year in August, trailing analysts' estimates of a 6.5% increase. One bright spot was retail sales, which rose 10.8% in August, beating the forecast of a 10.6% gain and July’s 10.5% rise.

According to Xinhua’s report earlier this month, investors are speculating that Beijing may be considering injecting more than 1 trillion yuan ($160 billion) into the Chinese economy over the next three years, which could drive the market out of its doldrums. China’s government may also be trying to buoy the market during the visit of Chinese President Xi Jinping to the United States this week. 

In our short-term technical viewpoint, the Shanghai Composite index has been moving in a symmetrical triangle chart pattern within a bullish descending wedge. A breakout of the symmetrical triangle could take the index to the 3,900 level. In August, a similar symmetrical triangle breakout failed and the Shanghai Composite index dropped almost 1,000 points.

Related Ticker: iShares MSCI China ETF [NYSEARCA:MCHI]