CHINA STOCK MARKET CRASH 2015, CHINA INTRODUCTION The Chinese stock market crash began with the popping of the stock market bubble on 12 June 2015.A third of the value of A-shares on the Shanghai Stock Exchange was lost within one month of the event. Major aftershocks occurred around 27 July and 24 August's "Black Monday." CAUSES Enthusiastic individual investors inflated the stock market bubble through mass amounts of investments in stocks often using borrowed money, exceeding the rate of economic growth and profits of the companies they were investing in. Investors faced margin calls on their stocks and many were forced to sell off shares in droves, precipitating the crash. By 8–9 July 2015, the Shanghai stock market had fallen 30 percent over three weeks as 1,400 companies, or more than half listed, filed for a trading halt in an attempt to prevent further losses. Values of Chinese stock markets continued to drop despite efforts by the government to reduce the fall. After three stable weeks the Shanghai index fell again on 27 July by 8.5 percent, marking the largest fall since 2007.

1. CHINA STOCK MARKET CRASH 2015

2. CHINA
China, officially the People's Republic of China (PRC), is a sovereign state
in East Asia.
Capital - Beijing
Largest city - Shanghai
Official languages - Standard Chinese
Recognised regional languages - Mongolian,Tibetan,Uyghur,Zhuang
Area - 95969691 sq. Km.
Population - 1.37 Billion (2015 estimates)
1.33 Billion (2010 Census)
•GDP (PPP) - $18.976 Trillion (2015 estimates)
•GDP (Nominal) - $11.212 Trillion (2015 estimates)
•Per capita income (GDP PPP) - $13,801
•Per capita income (GDP Nominal) - $8,154
•Currency - Renminbi (Yuan)

3. INTRODUCTION
The Chinese stock market crash began with the popping of
the stock market bubble on 12 June 2015.A third of the
value of A-shares on the Shanghai Stock Exchange was
lost within one month of the event. Major aftershocks
occurred around 27 July and 24 August's "Black Monday."

4. CAUSES
Enthusiastic individual investors inflated the stock
market bubble through mass amounts of
investments in stocks often using borrowed money,
exceeding the rate of economic growth and profits of
the companies they were investing in.
Investors faced margin calls on their stocks and
many were forced to sell off shares in droves,
precipitating the crash.

5. CAUSES
By 8–9 July 2015, the Shanghai stock market had fallen
30 percent over three weeks as 1,400 companies, or more
than half listed, filed for a trading halt in an attempt to
prevent further losses.
Values of Chinese stock markets continued to drop
despite efforts by the government to reduce the fall.
After three stable weeks the Shanghai index fell again on
27 July by 8.5 percent, marking the largest fall since 2007.

6. EFFECTS
Money magazine estimated that the potential negative
impact on the United States stock market may come about
when Chinese investors begin to seek out relatively stable
U.S. investments in treasuries, stocks, and cash, and
further strengthen an already-strong U.S. dollar, thereby
raising the prices on U.S. goods and diminishing export
profits.

7. EFFECTS
Global companies that relied on the Chinese market
suffered from the crash. Stocks that they own were
devalued US$4 trillion. For example, French alcoholic
beverage company, Rémy Cointreau, and British luxury-
goods company, Burberry, saw their shares devalued
and declining demand of their imports from Chinese
distributors.
 Second-quarter sales of American fast food company,
Yum! Brands, in China dropped 10 percent, resulting in
revenue going under the company's estimate. South
African ore mining company, Kumba Iron Ore, eliminated
its dividends on 21 July as the 61 percent loss of profit
in the first half of the yearwas announced.

8. GOVERNMENT RESPONSES
The Chinese government enacted many measures to
stem the tide of the crash.
Regulators limited short selling under threat of arrest.
Large mutual funds and pension funds pledged to buy
more stocks.
The government stopped initial public offerings. The
government also provided cash to brokers to buy shares,
backed by central-bank cash. Because the Chinese
markets mostly comprise individuals and not institutional
funds (80 percent of investors in China are individuals).

9. GOVERNMENT RESPONSES
state-run media continued to persuade its citizens
to purchase more stocks.
In addition, China Securities Regulatory
Commission (CSRC) imposed a six-month ban on
stockholders owning more than 5 percent of a
company's stock from selling those stocks, resulting
in a 6 percent rise in stock markets.
Further, around 1,300 total firms, representing 45
percent of the stock market, suspended the trading
of stocks starting on 8 July.

10. GOVERNMENT RESPONSES
(CONTD.)
Forbes contributor Jesse Colombo contended that the
measures undertaken by the Chinese government, along
with cutting the interest rate, "allowing the use of property
as collateral for margin loans, and encouraging
brokerage firms to buy stocks with cash from the
People's Bank of China" caused Chinese stocks to begin
surging in mid-July.
He argued that in general, however, the outcomes of
government intervention as it relates to the crash will, by
its nature, be difficult to predict, but saying that in the
longer term, the effect may be the development of an
even larger bubble through creation of a moral hazard.

11. GOVERNMENT RESPONSES
(CONTD.)
On 11 August, two months after the crash, the People's
Bank of China devalued the renminbi by 1.86 percent to
CN¥6.2298 per US dollar.On 14 August, the central bank
devalued it to CN¥6.3975 per US dollar.
As of 30 August, the Chinese government arrested 197
people, including a journalist and stock market officials,
for "spreading rumours" about the stock market crash
and 2015 Tianjin explosions. The crime of spreading
rumours carries a three-year jail sentence after its
introduction in 2013.
The government officials accused "foreign forces" of
"intentionally [unsettling] the market" and planned
crackdown on them.

12. BLACK MONDAY & TUESDAY
On 24 August, Shanghai main share index lost 8.49% of
its value. As a result, bilions of pounds were lost on
international stock markets with some international
commentators labeling the day Black Monday.
There were similar losses of over 7% on 25 August
causing some commentators to call it Black Tuesday.

13. EFFECTS ON INDIA
Black Monday hit India hard. Really hard.
The country’s benchmark index, Sensex, saw its
biggest-ever intra-day fall in absolute terms,
convulsed by the meltdown in China’s stock market
on Aug. 24.
A slowdown in the Chinese economy isn’t a terrible
event when you consider that Modi is trying to
attract manufacturers with his Make in India
concept.
While investors pull out funds parked in China and
other emerging economies, India still is an attractive
market. And the fall in the equity markets is

14. EFFECTS ON INDIA
A substantial part of Modi’s avowed plan to kick-
start the Indian economy was by way of big-bang
reforms. These include the controversial land
acquisition bill and the long-awaited goods and
services tax (GST), both of which are still stuck in a
limbo.
If the Modi government had managed to get these
key reforms off the ground, India would perhaps look
a little more attractive.
The biggest losers from the China crisis could be
the Modi government’s ambitious disinvestment
plans, and the much-needed capital infusion in
public sector banks.

15. REFERENCES
https://en.wikipedia.org/wiki/2015_Chinese_stock_market
_crash
http://www.economist.com/news/business-and-
finance/21662092-china-sneezing-rest-world-rightly-
nervous-causes-and-consequences-chinas
http://qz.com/488135/what-chinas-market-crash-means-
for-indias-economy/
Paul J. Lim. "How China's Stock Market Crash Affects
You". MONEY.com.
Gough, Neil (28 July 2015). "Chinese Shares Tumble
Again". The New York Times.
https://en.wikipedia.org/wiki/Goods_and_Services_Tax_
%28India%29_Bill