US investment bank Goldman Sachs has estimated the Chinese government has spent up to 900 billion yuan ($147 billion) in the last two months to try to prop up stock prices and halt a market rout.
After the Shanghai market peaked in mid-June and then fell 30 percent in three weeks, the government intervened with a rescue package that included funding the state-backed China Securities Finance Corp. (CSF) to buy stock.
Goldman said the government spent 860-900 billion yuan to support the stock market in June and July, according to a research report issued Wednesday.
The report put the total war chest of potential funds available for market support at around 2.0 trillion yuan -- including funds already spent.
Bloomberg News on Thursday reported that the CSF -- previously a largely unknown institution that helped provide financing to brokerages -- was seeking an additional 2.0 trillion yuan, which would bring its total market support funds to 5.0 trillion yuan.
Worries the government is preparing to exit the market, despite repeated denials, were the trigger for the biggest one-day fall in eight years of 8.48 percent last month.
But Goldman said fears of an imminent exit by the "national team" -- as the media and market regulator have dubbed the players supporting the market on behalf of the government -- are overdone.
"The probability of a rash exit is low as the market has not yet stabilised and the government has no pressing need for the funds," the report said.
It forecast the benchmark Shanghai index would trade in a range from the mid-3,000 point level but would be capped at 4,500 points.
On Thursday, the Shanghai Composite Index closed down 0.89 percent at 3,661.54 points. It is now down around 29 percent since its peak closing on June 12 -- nearly the level that sparked the initial government intervention.
Other analysts have said they expect the market to test support at 3,500 points and possibly at the 3,200 level in volatile trading.
Goldman said the government has picked up heavyweight blue-chip stocks in sectors such as banking, insurance, food and beverage, and healthcare.