Chinese Illegal Stock Market Activity: Police Subpoena 11 People, Including A Financial Journalist

As the Chinese government seeks to mitigate high volatility in the country's financial markets, police have called in 11 people as part of an investigation into illegal financial activities, Agence France-Presse reported Tuesday. A financial journalist was among the 11 targeted and is set to be questioned over accusations regarding the manufacture and spread of false information on securities and futures trading.

Caijing magazine, one of China’s most respected business publications, confirmed that police had subpoenaed writer Wang Xiaolu. The magazine "defended journalists' rights to do their duty under the law," according to a statement posted Wednesday on its website.

Wang is said to have written a story in July that suggested the country’s securities regulator was studying plans for government funds to exit the market. China’s Securities Regulatory Commission, or CSRC, denied the story, labeling it “irresponsible.”

Amid a falling stock market, which has dropped 30 percent since mid-June, China’s government has launched a rescue package that includes preventing short selling and stopping a process that allows the China Securities Finance Corp. to buy shares on behalf of the government.

Earlier this month the CSRC said the China Securities Finance Corp. would now enter the market during times of extreme volatility. Investors viewed the comments as a sign that the government would have less involvement in the stock market.

Meanwhile, investigators have announced a number of arrests and investigations among some of China’s biggest securities firms Wednesday, according to an Associated Press report. About eight employees of the state-owned Citic Securities Ltd., are suspected of illegal securities trading.

The crackdown on manipulation of prices appeared to suggest that the communist ruling party was attempting to deflect blame for the Chinese stock market meltdown this week, the AP report noted.