After 7 years of constant development, China’s stock market turned around and plunged at the beginning of June, its worst ever drop since 2007.
The Shanghai Composite index decreased 29 percent in a few weeks and the market lost 22 percent of its value in five straight days.
The Government announced that it would put in 40 billion dollars to calm the market and foster growth in parts of economy, which is slowing down due to the crisis.
The Chinese market is an immature one compared to others in the world. The Shanghai Stock Exchange was just opened in 1990.
The stock market is mainly controlled by small investments. Stocks are held mostly by domestic investors; many of them are private or retired ones, with little experience of business, and only 2 percent of total investments are foreign.
Since it’s lacking experienced and professional investors, the market is fragile. It would be better if the Chinese government eliminated restrictions on foreign investors, which would open the way for bigger and more professional companies to bring in stability.
The fall in the recent trading session is the act of the National Bank of China to devalue the yuan renminbi and allow trading it to be more flexible.
The act is supposed to be an effort to increase exportations by making Chinese goods cheaper than others.
This fall has affected investors in Asia and then all over the world. This domino effect proved how important the Chinese stock market is internationally.
The Chinese economy is predicted to slow down.
This will affect the world’s economy, especially the growth in Western parts.