Realized volatility in the Shanghai Shenzhen 300 equity market index remains at historically low levels despite the bear market in equity prices (the chart below shows a GARCH estimate of volatility for the 1st and 2nd Principal Components of sectoral returns to the SHSZ300 Index).

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The price movement has been negative, but not risky, by comparison to 2015, when China was in a growth recession and had to allow the RMB to depreciate in order to ease monetary policy.

The 1st Principal Component (to which all sectors show roughly equal exposure) explains 75% of variation in the index. The 2nd Principal Component is proxy for financials.