On Monday, August 24th, Chinese stock markets fell by 8.5%, creating a major crash in the Shanghai Composite. Investors have called this day China's 'Black Monday' because of the dent it has left in China's business as well as the consequences it has caused for the global economy. The crash was caused by many factors including the staggering amount of people investing in the Chinese stock market, suffering businesses with high stocks and prices, margin calls, and the sudden selling of stocks by these same investors. The stock market crash has had damaging effects on billionaires and global markets. Although some markets seem to be in recovery, the crash could be seen as a sign of a bigger problem in China.
This has been the biggest single-day market crash to happen in China since 2007. The country's stock markets had already been on a steady decline since June, with an overall decrease of 30% up until the day of the crash. Earlier this month, the government had devalued the yuan in order to lessen the effects of the decrease, but these efforts did not do much to change the course. Immediate effects of the crash have hit some of the world's richest people, who have overall lost a net worth of $182 billion due to the market decline and the crash.
The international impact of the situation is of bigger concern. The stock market decline and subsequent crash has caused decreased Chinese demand, which affects countries with major business stakes in the country. Among these are Chile, which sends almost half of its copper exports to China, and the United Kingdom, which has many mining and energy stakes in China. The U.K. stock market also faced a sharp decline as a result of the crash, but was able to recover its losses by the end of the week.
In addition to this, China's economy has been on a gradual slowdown, and the stock market crash is no sign that anything is improving. If China's economy continues to decline, it could mean bad news for the global economy. The stock market crash caused a brief jitter in global markets, but it could be seen as a symptom of an overall weakening of China's economy. All eyes will be on China over the next few months to see the direction the country is heading.