China's regulatory agencies have some 'suggestions' for corporations

An employee works on an assembly line producing Mercedes-Benz cars in Beijing, August 31, 2015.
Kim Kyung-Hoon | Reuters

U.S. stock markets opened lower after Chinese PMI data came out last night. The number came in at 49.7 in line with expectations, but at a three-year low, the first reading below 50 since February, implying contraction.

Surprisingly, some traders are suspicious of this number. They note many factories near Beijing have been closed for weeks in order to clean up the pollution ahead of the Thursday military parade, and that the September numbers will be better.

Maybe. What's odd is that the prevailing wisdom has been wrong again on China.

The theory has been to go long China for the early part of this week because of the enormous military parades on Thursday celebrating the end of World War II, or at least China's war with Japan. Markets will be closed in China Thursday and Friday.

Yet the Shanghai Composite ended down 1.2 percent, and the Shenzhen fell 4.6 percent.

Read More Weak China August factory, services point to further economic slowdown

You really have to wonder at what is going on in China. Four regulatory agencies have issued a joint statement "encouraging" listed companies to take action to shore up their shares. These suggestions include:

1) Pay dividends, which very few Chinese companies do.

2) Buy back more shares. They will provide tax breaks to help do that.

3) Do more mergers. State-owned banks will be encouraged provide loans to companies to do those mergers and acquisitions.

4) Do more restructurings.