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Here’s why Chinese stocks slumped today

Shanghai Stock ExchangeShanghai Stock Exchange
What's Mandarin for "TGIF"?Photograph by On Man Kevin Lee — Getty Images

The Shanghai Composite Index, a measure of the Shanghai Stock Exchange, dropped more than 6% in late trading Tuesday and dragged other Asian markets down as well. The drop was the largest for the Shanghai Composite Index in three weeks.

The slumping stocks seem to be caused by continued concern over the stability of the yuan, which the Chinese central bank devalued three days in a row starting Tuesday of last week, as well as declining faith in the Chinese government’s willingness to intervene in the markets.

On Friday, the Chinese Securities Regulatory Commission Friday said it would “let the market exercise its function of self-adjustment” amidst market volatility, according to USA Today. That’s a far more hands-off reaction than it exhibited after a mid-June crash, when the securities regulator banned shareholders with large stakes from selling.

“Investors ran for the exit when the government failed to step in to support the market,” Reorient Financial Markets economist Steve Wang told Bloomberg News.

It’s been a rocky summer for the Chinese market: over an earlier three-week period beginning in June, the Chinese stock market tumbled 30% from seven-year highs.