Name: What Happened to China's Stock Market?
Uploaded: 2015-08-03
Duration: 1 min 19 s
Description: How did China's stock market take such a steep plunge?

[ MUSIC ] For months China's stock market was on the rise. And now it's dropping fast. In the last week of July it plunged 8. 5 %, which would be the equivalent of the DOW Jones losing 1500 points. So why did this happen? It started last fall when China's state- run media began trumpeting how cheap stocks were, and encouraging people to invest. And they did invest, enthusiastically. But here's the catch, they bought the stock with borrowed money. The market climbed 150 % in less than a year. But at the same time, corporate profits were falling. In fact, growth as a whole in China was down, which, in turn, created doubt in the market. So then the market began to constrict. And many investors found that the stocks they owned were worth less than the amount they had borrowed to purchase them. Forcing them to sell. Millions of individual investors began selling their stocks, creating a crash. This affected only a small portion of the population but this matters to the United States because China is one of the largest economies in the world. If their market falls, It can send ripples through the global economy. [ BLANK_AUDIO ]

What Happened to China's Stock Market?

How did China's stock market take such a steep plunge?