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China Bursts a Bubble

China's government has once again managed to engineer a mini-stock market collapse. This time, though, it's probably a good thing.

The ChiNext composite index dropped 5.6 percent Wednesday after a report in the 21st Century Business Herald indicated the authorities may curb the ability of wealth-management vehicles to invest in equities. The story also dragged the blue-chip-heavy Shanghai Composite 1.9 percent lower and lopped 4.5 percent from the Shenzhen index. (The ChiNext fell another 1.8 percent as of 11:30 a.m. Thursday, while the Shenzhen index declined 1.4 percent and the Shanghai measure was down 0.6 percent.) As deep as the plunges seemed, they were merely the worst since early June. Volatility is a fact of life in China's stock market.

The declines this time were...