Although the Chinese stock market has shown sign of stabilization after it flailed for one month, the offshore fund is still reducing its risk exposure on mainland's stocks.

Anbound’s research team is of the view that these foreign investors have made such rational decisions based on their understanding and confidence on China’s stock market.

If the foreign investors do not change their view and the stock market does not recover soon enough following the market rescue, it is likely that China’s stock market might see another stalemate and this will cost the Chinese government a great deal in terms of financial and policy resources.