Yes, Shanghai composite will recover after the recent margin crackdown, because Chinese businesses are on the rise. There is so much growth in the Chinese sector that one tiny little blip is not going to mean a depression or a recession. China has tapped some dormant growth potential and there is so much room to grow that Shanghai composite will not be set back for long.
Like all things financial, any loss is only something over the short term. Investors have a bad memory when they see an opportunity. Any issue in Shanghai will self correct itself, and savvy investors will figure out ways to make money. What should be eliminated are the elements which caused the crack down in the first place.
The Shanghai composite has surged almost 63 percent in the last 12 months, and the three brokerage firms involved in the recent margin changes do not control the market. Other companies with real money will step in and purchase the equities these companies could not. For some other buyer, this will simply be an opportunity.
No, the Shanghai Composite will not recover. It is my belief that, with a little research, the margin crackdown was caused by brokers being charged with illegal trading. If the reason that the Shanghai Composite was high in the first place was because of illegal trading, I don't see how it could recover now. Research shows that anything involved in illegal activities usually drops, and I don't see why that would be any different here.