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Things to know about the Chinese stock crisis

Things to know about the Chinese stock crisis 6

Things to know about the Chinese stock crisis

Officials in this country warned that there is `panic` in the market.

Yesterday was considered Black Wednesday for the Chinese market.

The market showed signs of recovery today.

Xinhua also said that the country’s police are investigating `dangerous short selling activities` in the stock market.

CNN reviewed notable issues surrounding the plunge in Chinese stocks.

1. Why do stocks lose value?

A Chinese investor is monitoring stock information.

Earlier this year, Chinese stocks showed many basic signs of a bubble.

And the inevitable consequence is that the bubble will burst when it is too stretched.

2. What has China done to save the market?

Although many analysts believe the stock market is undergoing a much-needed `correction`, the Chinese government still wants to prevent a sell-off to support stock prices.

Dong Tao, chief economist for Asia at Credit Suisse, said that Beijing is afraid that the market sell-off will reduce consumption, because those who lose money will be less able to shop and spend.

3. How does this affect the world?

Very few foreign investors have direct exposure to the country’s stock market.

What the world is really worried about is the impact from the stock market on the world’s second largest economy.

4. How are Chinese people affected by this?

Chinese civilians are the biggest victims of this.

However, compared to the beginning of the year, China’s two main stock indexes still increased.

5. What do Chinese leaders think?

The plummeting Chinese stock market is a huge challenge for the country’s senior leaders.

The strong measures Beijing has taken to stop the sell-off could also undermine confidence in China’s commitment to market reform.

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