Chinese stocks retreated on Wednesday following a move by the government to curb lending. The Chinese government has been telling some major banks to curb lending, which could cloud their outlook and put a damper on economic growth in the country.

While the move to limit growth is ultimately good for the economy, according to many economists, the slowdown will surely constrict the country’s investments and slow down the rapid growth in household wealth that came on the heels of the boom.

Currently, these concerns are merely rumors and not confirmed fact. But ultimately, rumors are all it takes to move the markets. Hong Kong’s Hang Seng index fell 1.31% or 283.75 points to 21,394.23, while China’s Shanghai index fell 1.04% to 3,213.17.

Major Chinese banks also moved lower during the session. Bank of China dropped 2.93%, China Construction Bank fell 2.65%, and Industrial and Commercial Bank of China dropped 1.98%. Meanwhile, other financials were also lower, forcing the average down 1.42%.

Notably, there are several actions that have already been taken that are not simply rumors. China’s central bank has ordered at least two banks to lift their reserve ratios by 0.5%, while also clamping down on excess liquidity via raising short-term debt yields over the past two weeks.

Combined, the speculation and confirmed actions have led to a global drop in equity prices. Latin American stocks in particular were hit as China represents a major export market for raw materials and commodities from countries like Brazil.

CONTACT: 888-288-5215 · Please read our Full Disclaimer pertaining to this article.