Chinese equity markets

Chinese equity markets recorded their strongest one-day drop since the global financial crisis has, reports Reuters. The reason for this became penalties imposed by the authorities on financial institutions because of market speculation, which are partly responsible for the appreciation of the shares in the country by 53% in 2014

Stock collapse

The two major index of Chinese markets retreated with 7.7%, which is the biggest loss for a session in June 2008. The collapse wiped around 315 billion. Dollars from the market value of companies in the Shanghai Stock Exchange. Shanghai Composite Index fell to 3116.35 points, while the CSI300, which brings together the largest listed companies in the country, declined to 3355.16 points. Subindices of the banking and financial sector fell by 10%, which is the maximum permitted daily movement.

Chinese equity markets were among the strongest performers last year, only for the fourth quarter shares rose more than 40%. This growth was led by brokerages, whose shares fell heavily on Monday after regulators announced fines for three of the largest companies because of their illegal operations in margin trading. Banks also suffered, as the banking regulator announced plans to tighten supervision of one of the shady banking products - ie. entrusted loans (a type of residential loans).

Much of the time for the last one decade Chinese GDP experienced nearly double digit growth rate. This way, Chinese economy has turned into the world's fourth largest now. If the current trend continues after 2-3 decades the Chinese economy will emerge as the largest. This means that Chinese economy will consume more energy in future too. The rest of the world is looking at China now to see what the country is doing to address this issue. China has already become the second largest importer of oil. This sounds to be astonishing because only 2 decades ago Chinese economy hardly needed any imported oil.