Stock market shares in China fell sharply early Monday. The Shanghai Composite dropped 8.5 percent, marking the sharpest fall China has seen since 2007. Chinese media are calling the day "Black Monday."
Stock markets around the world responded to China’s overnight drop. In the United States, the Dow Jones Industrial Average opened Monday more than 1,000 points down. The Dow has never lost more than 800 points in a day. By mid-day, the Dow had partly recovered.
Markets across Europe and Asia fell sharply Monday, as well. London’s FTSE 100 index was down by four percent. Other major European indices were down by as much as six percent in late-afternoon trading. Japan's main market lost more than four percent and Hong Kong was down more than five percent.
Monday’s one-day market drop in China follows last week’s 12-percent drop. Observers warn changes in global markets are likely to continue in the coming days.
Market instability comes after the yuan devaluation
The market instability comes just a week after China reduced the value of its highly controlled currency, the yuan. The yuan devaluation removed more than $5 trillion from the value of global market shares.
China’s stock market drop has raised questions about the effectiveness of the Communist government’s efforts to boost the index over the past two months.
Markets in China lost more than 30 percent in the month of June. Since then, the government has intervened by putting more money in the market through state-owned businesses.
Shawlin Chaw is a senior analyst at Control Risk in Shanghai. He told VOA the government intervention of the markets "appears to be losing its strength.”
Over the weekend, the Chinese government again acted to help increase share prices. It started allowing pension funds to invest in stocks for the first time.
But the actions by state-owned businesses in the market and policy changes by the government do not appear to be working.
Observers say the Chinese government needs to put more efforts into reviving the economy, instead of being so concerned about protecting the market index.
Raymond Yeung is an economist with ANZ in Hong Kong. He said the government needs to “think about what it should possibly do to revive the economy as a whole rather than just delivering some measures to boost the market index...”
Experts say the government's intervention comes from a strong desire to show that “everything is under control” with the Chinese economy.
China’s economic decline has not only affected markets overseas in recent days. It has also affected people’s opinions of the government within China. This is creating an image problem for the government that is not easy to fix.
Ashley Thompson wrote this report for VOA Learning English, with materials from VOA News and Reuters.
Words in This Story
instability – n. the state of being likely to change
boost – v. to increase the force, power, or amount of (something)
revive – v. to make (someone or something) strong, healthy, or active again