One aspect of the recent stock market turmoil has been the manner in which the Chinese government intervened to support the market, with many players asking what this means for the future of the bourse.

This month the Hong Kong Exchanges & Clearing Ltd chief executive, Charles Li, called China the world's "safest" stock market. He was trying to ease investor concerns over government intervention and surging volatility, but he may also have highlighted how the stock exchange is not entirely a free market.

Beijing banned large shareholders from selling stakes, ordered state-owned enterprises to buy shares, allowed the central bank to finance stock purchases and permitted 70 per cent of companies on mainland exchanges to halt trading.

Critics say the intervention undermined a government promise to boost the role of markets in the world’s second largest economy and it is probably a setback for the plans to allow mainland stocks into MSCI Inc’s global benchmark indexes.

However, we shouldn't forget there are precedents for the government's actions. During the Asian crisis in 1998, Hong Kong authorities bought $15 billion of shares to prop up prices, and the US Securities and Exchange Commission temporarily banned short-selling of some stocks during the 2008 financial crisis. Congress allowed $700 billion to recapitalise the US banking system, and also allowed the government to take over Fannie Mae and Freddie Mac.

Creating this kind of moral hazard in the market can happen in many places.