Chinese stocks are in the midst of a plunge, with the Shanghai Stock Exchange Composite Index, dropping 27 percent since June 12, as frothy price levels have led investors to head for the exits.

Chinese officials are working hard to fight the plunge, pushing 21 major brokerages to invest 15 percent of their net assets in a 120 billion yuan ($19.3 billion) fund designed to stabilize the market by purchasing shares.

That's basically spitting in the wind, given that the Shanghai Exchange's daily volume often tops 1 trillion yuan, says MarketWatch columnist Craig Stephen. The Shanghai Composite Index lost 1.3 percent on Tuesday.

So why is the government working so hard to sustain the bull market that has pushed the Index up 87 percent over the past year?

"It created this bull market," Stephen writes. "Keeping it going is now seen as a test of the Communist Party’s strength, and possibly even its legitimacy. If you created the boom, arguably that also puts you on the hook for the bust."

Elsewhere on the China front, hedge fund legend George Soros is worried about the political, economic and military conflicts festering between the Asian titan and the United States.

"Both the US and China have a vital interest in reaching an understanding because the alternative is so unpalatable," he writes in The New York Review of Books. "The benefits of an eventual agreement between China and the U.S. could be equally far-reaching."

Soros cites the recent agreement between President Obama and Chinese strongman Xi Jinping on climate-change policy as an example.

"If this approach could be extended to other aspects of energy policy and to the financial and economic spheres, the threat of a military alignment between China and Russia would be removed and the prospect of a global conflict would be greatly diminished," he says.

"That is worth trying .... Fully recognizing the difficulties, the U.S. government should nevertheless make a bona fide attempt at forging a strategic partnership with China."

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