Could this be the reason behind their excursion to snatch away islands from the West Philippine Sea?

Just a few short weeks ago, Chinese state media were touting it as the place where people could realise what President Xi Jinping calls the “Chinese dream”.

But since then, that dream has turned into a nightmare for the millions of mainlanders who heeded the leadership’s call to invest in the stock market.

For a while, it looked like the gamble paid off. By the time the market peaked last month, it had risen by as much as 150 per cent since November.

But the collapse took only a fraction of that time – the market lost about 30 per cent from its height of 5,166 on June 12 to hit a low of 3,631 at yesterday’s session, wiping off more than 20 trillion yuan (HK$25 trillion), or the equivalent of Britain’s gross domestic product, just in three weeks.

Analysts said China would pay a high political, economic and social price for the tumble. The stock market fall would delay the slow economic recovery, complicate macroeconomic management, damage the government’s credibility, trigger social discontent, and undermine the Communist Party’s leadership under Xi and Premier Li Keqiang.

The market is now in clear bear territory and more volatility is likely, conditions that will test the leadership if things do not improvHow grim is the outlook for China's stock market? The South China Morning Post attempts to help makense of it all.e soon.

Analysts said the slump had tarnished the government’s reputation because many believed the authorities were in large part responsible for the bubble.

Indeed, the government has cheered on the rally via state media since the middle of last year, with officials talking daily about “an inevitable bull market”.

When the Shanghai Composite Index broke through the 2000, 3000 and 4000 barriers, hitting four-, five-, six- and seven-year highs, People’s Daily declared: “4,000 points is just the beginning of China’s bullish market”.

Xinhua, and the official China Securities Journal and Securities Times all joined the chorus, singing along with slogans such as: “The A-share market is where to realise the ‘Chinese dream'”, and “The stock market is facing a 30-year golden time”.

The debate now is on how the government will handle the challenges.