According to the South China Morning Post (subscription required), the Chinese government has taken to censuring financial media in effort to stem the floodgates of discontent brewing over dismal market sentiment.

With the craziness of the financial meltdown in the United States, the Shanghai Stock Exchange has followed the rest of the world down the rabbit hole. Within 10 minutes of the opening of the SSE on Tuesday morning, right after the declared bankruptcy of Lehman Brothers, the SSE Composite fell by almost 5% but slowly steeled itself back around the 2000 mark.

The idea of the SSE breaking the 2000 barrier might have seemed impossible this time last year but the stock market has been free-falling, losing more than half its value since January. Frustrations have been mounting despite varied efforts by the regulators to stem the volatility (loan controls, bank reserve rates, administrative fiats, etc). Calls for government intervention have grown louder as fund managers, academics and regulators debate the efficacy and timeliness of a Chinese-styled bailout.

The interesting point is now, because this is the real issue behind the figures:

SCMP reports that perennial fears of social disunity have led the Communist Party’s Publicity Department (rather than the securities regulator) to verbally inform major financial websites to sift out negative and sensitive commentaries, reports and headlines about the hard-hit markets. There is no paper trail backing up such claims, but editors of online financial media have confirmed them.

Read rhe full post here.