Chinese financial regulators have met again to discuss growing concern about surprise events, such as a sharp escalation in the trade war with the United States, that could severely damage China’s financial markets. The discussion of what to do to avoid “black swans” that could cause major disruptions was made at the latest meeting of the Financial Stability and Development Committee (FSDC), the agency coordinating financial regulation chaired by Vice Premier Liu He. The meeting concluded that China must fine-tune monetary policy to maintain ample liquidity in financial markets to manage its economic and financial situation in the light of escalating challenges posed by the trade war.

China must “prevent all kinds of ‘black swan’ events to maintain a healthy development of stock, bond and exchange rate markets”, according to the statement, referring to a term popularized by Nassim Taleb early this century to describe surprise events that cause significant disruptions. It was the third meeting of the FSDC in the last 100 days, reflecting Beijing’s heightened alertness to financial volatility as the escalation of the trade war with the U.S. and financial turmoil in a number of emerging markets, particularly Turkey and Argentina, started to erode investor confidence. Members of the FSDC include Yi Gang, Governor of the People’s Bank of China (PBOC), and Guo Shuqing, Chairman of the China Banking and Insurance Regulatory Commission (CBIRC).

But market disruptions can be hard to anticipate, said Zhou Xiaochuan, Yi’s predecessor at China’s central bank. Zhou said the direct impact of U.S. tariffs would be manageable for Beijing but he warned about dangers from a quick shift in mood in the markets. “We saw when the Lehman Brothers event happened – there was sudden panic and contagion, so this kind of thing is not very easy to analyze,” he said. The trade war was a “major reason” for the slump in Chinese stocks in recent months, Zhou said. China’s benchmark stock market index has lost about 20% of its value so far this year. Chinese authorities would use forceful measures if they felt the need to protect the financial system, Zhou said. Beijing adjusted its policy this summer to focus on stabilizing growth at home by speeding up infrastructure investment, although China’s headline economic growth rate was still 6.7% in the second quarter, the South China Morning Post reports.