The ruling Communist Party is sacrificing short-term economic growth as it seeks to make the nation’s long-term expansion more sustainable, in part by curbing credit, Gary Dugan, the Singapore-based chief investment officer for Asia and the Middle East at Coutts & Co., said in a July 10 interview.

“With a new plan to rebalance the economy, we’ve got something of a cloud over” stocks, Dugan said.

Relative Value

China will increase a program for foreign funds to invest in its local financial markets to $150 billion from a previous limit of $80 billion, according to a statement posted on the China Securities Regulatory Commission’s website on July 12. The government restricts access to mainland markets through its Qualified Foreign Institutional Investor program, which has granted firms a combined quota of $43.5 billion as of June 26. That compares with the $3 trillion market value of locally- listed companies.

MSCI’s China measure trades for 9.3 times reported earnings, versus 16 times for the S&P 500 index, the biggest discount since September 2003, weekly data compiled by Bloomberg show. The MSCI Emerging Markets index has a multiple of 11.

“Sentiment is quite fragile” on China, Marco Li, a Hong Kong-based money manager at Manulife Asset Management, which oversees about $238 billion, said by phone on July 9.

In 1992, China’s Vice Premier Zhu Rongji approved the first batch of nine state-owned companies to sell shares in Hong Kong, then under British control. Tsingtao Brewery, founded by German settlers more than a century ago in the coastal city of Qingdao, was first among the companies, known as the China Nine, to meet international accounting standards.

GDP Growth

Officials toasted Tsingtao Brewery’s debut on the Hong Kong stock exchange with beer instead of the customary glass of champagne as shares jumped 29 percent. The rest of the China Nine, including Sinopec Shanghai Petrochemical Co. and Maanshan Iron & Steel Co., sold shares in the following 12 months.

“For the first time in its history, China and its companies had access to the financial techniques and markets that enabled them to raise meaningful amounts of capital,” Carl Walter and Fraser Howie wrote of the H share market in their 2011 book “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”