For years now we’ve been hearing dire warnings about borrowing money from China so the first thing I thought when I heard that the Chinese stock market had plunged was if they had the capability to call in our loans and what does that mean.  Might we have to give them Nevada (my personal recommendation since it would eliminate the pit of horror that has become Las Vegas). Well, let’s look closer at the situation.

The Shanghai Composite Index capped its steepest three-week decline since 1992 as measures to shore up Chinese equities failed to stop margin traders from unwinding positions at a record pace. The benchmark equity measure fell 5.8 percent to 3,686.92 at the close, extending losses to 29 percent since the June 12 peak.  What does this mean?  Chinese shares have erased more than $2.8 trillion of value in three weeks, marking an abrupt end to the longest bull market in the nation’s history. Just 39 of the 1,106 stocks in the Shanghai Composite posted gains on Friday, paced by PetroChina Co amid speculation of buying by state-backed funds.

With the Shanghai gauge tumbling more than twice as fast as any other index worldwide, regulators have pledged to investigate market manipulation and unveiled measures to revive confidence among the nation’s 90 million individual investors.  But so far these steps have been overshadowed by concern that leveraged traders will keep liquidating bullish bets after equity valuations exceeded levels during the country’s stock- market bubble in 2007.

Regulators have made late-night announcements almost every day since the benchmark index entered a bear market. The China Securities Regulatory Commission (CSRC) said Thursday it will investigate and “strictly” punish manipulation, while people with knowledge of the matter said the CSRC is examining recent short-selling activity for stock-index futures. The nation’s financial futures exchange has suspended 19 accounts from short selling for a month, Reuters reported, citing unidentified people with direct knowledge.

The central bank cut interest rates while margin trading rules were eased and trading fees were cut and large-cap stocks rallied amid speculation of buying by government-linked funds. PetroChina, the nation’s biggest company by market value, climbed 12 percent.

“For now, the mood is verging on panic, and it is extremely hard to calm a bear who is in a rage,” said Bernard Aw, a strategist at IG Asia Pte in Singapore. “Chinese brokers may still be looking at reducing their risk exposure by closing more margin debt.”

The outstanding balance of margin loans on the Shanghai Stock Exchange dropped for a nine days in a row, sliding to 1.29 trillion yuan ($208 billion) in the longest stretch of declines since the city’s bourse began compiling the data. A five-fold surge in borrowing had helped propel the gauge to a 150 percent advance in the 12 months through June 12.

The Shanghai Composite retreated 12 percent in five days and 50-day price swings surged to the highest level since 2008. Major stock indexes briefly erased losses after executives of 28 companies listed in the ChiNext index said they would take measures such as buying equities or halting new share sales to support prices. The ChiNext dropped 1.7 percent, erasing a gain of as much as 5.3 percent. The CSI 300 Index declined 5.4 percent. Hong Kong’s Hang Seng China Enterprises Index slid 1.4 percent while the Hang Seng Index dropped 0.8 percent.

The government will do “whatever it takes” to restore investor confidence because fear would trigger forced liquidations and panic selling, Judy Zhang, an analyst at BNP Paribas SA in Hong Kong, wrote in a note dated Friday. It may slow the pace of initial public offerings or cut the stamp tax, she said.

Subscriptions for 28 IPOs are estimated to lock up 4.03 trillion yuan from Friday through next week, according to a Bloomberg survey. Gauges of industrial and utility companies in the CSI 300 slumped at least 6.7 percent, the worst performers among 10 industry groups, after doubling over the past year.

So, at this time, even though China is taking a pretty big hit, the government is confident that it can keep things rolling.  So, I guess we don’t have to worry about China repossessing the capitol building and moving it to one of their monument sightseeing parks.  Not yet anyway.