Should Beijing prop up stock markets to combat its slowest economic growth since 1990?

China’s faltering stock markets, compounded by an economy that is growing at its slowest pace since 1990, have incited a heated debate among think tanks and analysts on whether Beijing should step in to help shore up investor confidence.

The benchmark Shanghai Composite Index – the world’s worst performer among major markets last year – has extended its decline, sinking to its lowest level in four years at the start of 2019 amid ongoing US-China trade war tensions and dimming prospects of the domestic economy. The Shenzhen Composite Index has also plummeted 28 per cent in the past year.

The persistent slide in the nation’s yuan-denominated A-share market is twice the bad news: a slump not only thwarts fundraising opportunities for the businesses in the capital markets, but also dampens confidence that could have buoyed much-needed domestic consumption.

“Because the stock markets keep falling, there are concerns that it may affect Chinese consumption and the economy,” said Stanley Chan, director of research at Emperor Securities.

So much so that researchers from the Renmin University of China Bian Yongzu and Chen Zhiheng have called on the People’s Bank of China, or central bank, to intervene.

“The irrational decline in the stock market has a significant negative impact on economic development,” the duo said in a commentary published in the official Securities Times newspaper earlier this month.