China’s stock market plunges

SHANGHAI — Share prices in China plunged Friday in one of the sharpest sell-offs in years, accelerating a downturn this week in what has been, for much of this year, the world’s best-performing stock market.

Analysts had been warning for months about the risks of a stock market bubble in China, where giddy investors have driven up stock prices by purchasing shares on margin, with money borrowed from brokers.

The market boom has also helped encourage a wave of Chinese companies that had been listed in the United States to arrange stock buyouts and delist from American exchanges, then relist in China, where stock valuations are much higher.

In the past few months, some well-known Chinese companies have announced plans to buy back shares and leave Nasdaq and the New York Stock Exchange, including Wuxi Pharma Tech, HomeInn Hotels and Qihoo 360, the Internet service provider, whose management is offering $9 billion to complete the buyout.

The latest downturn comes as the authorities move to tighten rules on buying stock with borrowed money, which is believed to be one of the key reasons for a stock market rally that has sent share prices to seven-year highs.

Many analysts say that the government props up the stock market as a policy move aimed at helping debt-burdened state-owned companies repair their balance sheets.