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China's Stock Market Crash, Explained

To help make sense of what’s roiling the global markets, here’s an explainer from our sister site

China’s stock market has been plunging over the past month, and the Chinese government is panicking. Over the past week it has employed a number of extraordinary measures to try to halt the market’s slide, to little effect. On Wednesday, the benchmark Shanghai Composite index fell another 5.9 percent, bringing the market’s total losses to 32 percent in less than a month.

The question is whether the plunge is just an ordinary correction after a year of big gains, or if it’s the first sign of deeper problems in the Chinese economy. Chinese stocks surged last year, but those gains didn’t reflect broader economic gains. Rather, they were a result of more and more people investing in the stock market with borrowed funds. That has created instability and a danger that many investors will suffer outsize losses as the market falls.

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