Is Chinese capitalism in crisis, as stock market rout drives private companies into the state’s arms?

China’s private enterprises, not even middle-aged in their experiment with capitalism, are rushing back into the government’s arms for financial succour, as the country’s worst stock market rout in three years has starved more and more companies of cash.

At least 32 companies listed on the Shanghai and Shenzhen bourses sold controlling stakes to the Chinese state as of October 17, six of them to the central government, while 26 were taken over by provincial or city-level agencies, according to data by Shanghai Wind and China International Capital Corporation (CICC).

Call it privatisation in reverse, or re-nationalisation, as Chinese capitalism lays in crisis.

The 33 per cent plunge in the Shenzhen Composite Index this year has wiped out 7.6 trillion yuan (US$1.1 trillion) in value. That put the squeeze on companies that are already battling the aftermath of a trade war with the US, slower demand in the Chinese economy and tight monetary policy, forcing them to seek sanctuary in the coffers of the world’s second-largest economy.

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“This is about survival,” said Partners Capital International’s chief executive Ronald Wan. “When doors are shutting elsewhere, the only one who can save them seems to be the government.”