China's central bank tightens currency rules as government increases intervention in economy

The People's Bank of China is planning to tighten foreign exchange trading rules to prevent a further devaluation of the Chinese yuan, inside sources have told Reuters. The newswire reported that the Chinese central bank is increasing sanctions on currency trading again, following several interventions in August.

The yuan hit its lowest point since devaluation on 11 August on Monday (31 August) trading at CHY6.35 per US dollar and stabilising around CHY6.37 on Tuesday.

The Chinese government has continued to intervene in the stock market crash, which kicked off on Monday, 24 August, when the Shanghai Composite lost a total of 8%.

On 31 August, news surfaced that Chinese authorities had arrested more than 200 people on charges of spreading rumours about the stock market.

Chinese state media reported that financial journalist Wang Xiaolu was arrested and "placed under 'criminal compulsory measures' for suspected violations of colluding with others and fabricating and spreading fake information on securities and futures market".

Xiaolu appeared on Chinese state television "confessing" to triggering fears about the stock market after he wrote an article published in respected business magazine Caijing exposing intervention from the Chinese government.

Although government measures such as preventing big investors from selling shares for six months have been welcomed, the country's ruling party has secretly been introducing measures over the past week, which has been received with more scrutiny.

The PBoC has also cut reserve ratios an investment rates to encourage investment, and the Shanghai Composite reported gains on Thursday, sources told Western media that it was the result of government intervention, rather than increased faith in the Chinese market.

After the Chinese stock market erased all gains made in 2015, concerns about China's underlying economy were raised. Macroeconomic data suggests a big growth slowdown in the booming country. The PMI data from August even showed that manufacturing activity even dropped compared to July.