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The reasons behind the fall in China

The reasons behind the fall in China

China’s economic growth is slowing and there are concerns that the transition to a slower and more sustainable rate of growth might be disruptive.

In the 12 months up to mid-June the Chinese stock market saw a boom as  the main Shanghai index more than doubled. Following this, share buying with borrowed money meant when the market started to decline many investors decided to sell investments to pay back debts. That magnified the initial fall.

There is often some specific factor driving shares lower on particular days. On this occasion it was an error of the Chinese Central Bank. It did not take steps to stimulate more bank lending, which was a disappointment for investors who thought it would do. Without this shares fell, and sharply.

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