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The Chinese stock market roller coaster looks to be coming back in full force

The roller coaster that is the Chinese stock market seems to be back in full force.

Stocks in Shanghai had been in a period of relative calm so far this year, but a relatively precipitous drop of 2.7 percent this month has refocused attention on the markets.

This year, investors have been buoyed by stronger economic data — first quarter GDP growth came in at 6.9 percent, which was better than expected. Specific sectors like property and construction also got a boost after Beijing announced the creation of a new special economic zone, dubbed Xiongan New Area, in Hebei province. But, as the saying goes, what goes up must come down.

Investors chat as they sit in front of computer screens showing stock information at a brokerage house in Qingdao, China, September 7, 2015.
China Daily | Reuters
Investors chat as they sit in front of computer screens showing stock information at a brokerage house in Qingdao, China, September 7, 2015.

Since late last week, Shanghai stocks have been on a bit of a losing streak. Monday's drop of more than 1 percent was the worst thus far this year, and Tuesday saw an uptick that left numbers little changed. The Shanghai Composite was up about 0.3 percent by 11 a.m. SIN/HK. This recent volatility complicates government efforts to keep calm in the markets ahead of a major leadership change this fall.

Only about 10 days ago, Liu Shiyu, the chairman of the China Securities Regulatory Commission, delivered a speech at the Shenzhen exchange, making an explicit call to maintain market stability, connecting the financial markets to politics directly.

Consultancy Eurasia Group pointed out that Liu said, "today there is no finance without politics, and no politics that does not closely watch finance," noting sensitivities around the coming change in top Communist Party brass and protecting the 100 million investors in China.

Regulators have more recently floated some modest market reforms, such as faster IPO approvals and more trading of new commodities securities. In the past, there has talk also of tackling insider trading, but given the focus on stability, major changes may again take a backseat.