After a large and rapid rise in Chinese stocks, there was an equally rapid and catastrophic collapse. The reason was simple – company valuations were much more optimistic than their actual performance. China’s stock market was dominated by private investors, who often invested leveraged. Between November 2014 and June 2015, stock indices on China’s exchanges more than doubled – for example, the Shanghai Stock Exchange index rose from 2506.86 to 5045.69.

On July 8, the Shanghai Stock Exchange index fell 6.4% and the CSI300 index fell 6.7%. The fall caused panic, and more than 500 large companies suspended trading in securities the next day because of the risk of bankruptcy. The fall of stock exchanges in China also affected the world stock market: the Japanese index Nikkei 225 fell by 3.1%, in Australia iron ore prices fell by almost 6%, the South Korean index Kospi collapsed by 1.2%, and oil prices fell from 60 to 57 dollars per barrel. Securities that have turnover in the Chinese stock market suffered losses of more than $3 trillion of their value, the maximum depreciation since 1992. On July 18, the next collapse occurred as the Shanghai Composite index fell 6.15%. In all, for three weeks from July 8, the Shanghai stock market fell 30 percent. On August 17-20, after a temporary stabilization, the stock market crash resumed. On August 24, the collapse of China’s stock market led to a 6-8% drop in stock indexes around the world.