The Chinese government is trying to dampen demand for local tech stocks after President Xi Jinping personally endorsed blockchain technology, sending their value soaring.
Stocks of almost 200 companies that invest in blockchain technology jumped around 8% on Monday, according to an index compiled by East Money Information, with some very quickly hitting their daily limit of a 10% increase.
The spike came three days after Xi called for faster development of the blockchain sector, according to Chinese state-run news agency Xinhua.
“(Xi) stressed the importance of stepping up research on the standardization of blockchain to increase China’s influence and rule-making power in the global arena,” Xinhua said.
According to two inquiries sent by the Shanghai Stock Exchange and seen by CNN Business, companies involved in blockchain services were asked to better explain their businesses and keep their official statements factual and simple to avoid hype.
The Chinese government is also trying to manage investor enthusiasm.
A commentary published by the Communist Party’s official mouthpiece, the People’s Daily, called for Chinese market traders to restrain themselves.
“Of course the future of blockchain is here but we must stay rational,” the commentary published Monday said. “Blockchain innovation does not mean speculating virtual currencies … We must also see that the blockchain is still in the early stages of development.”
The stocks in East Money Information’s blockchain index have been paring back their gains since Monday. The index declined nearly 3% on Wednesday.
For more than a year, Beijing has been pushing to increase innovation and self-reliance in the country’s technology sector as it faces growing competition with the United States.
On October 15, China launched its first nationwide blockchain-based service network, or BSN, which Xinhua said would provide services for the “development of smart cities and the digital economy.”
Blockchain is the latest technology trend to have spread to across almost every industry globally.
Put simply, blockchain is a public ledger of transactions or promises stored on multiple computers. Changes can’t be made to the data, making the system difficult, if not impossible, to hack.
Developed in 2008, it has frequently been used in the sale of cryptocurrencies, another area in which the Chinese government is taking a growing interest.
Blockchain has already been used in China for other, less democratic purposes.
Following Xi’s speech, the Chinese Communist Party’s top decision making body, the Central Political Bureau, released a statement announcing the launch of a blockchain where cadres could publicly and permanently express their loyalty to the party.
It was called “Chain of the Original Heart.”
“Let us record together and witness together. What are you waiting for?” the statement from the CCP said.