SYNOPSIS

ON THE
BUBLE CRASH OF
CHINESE ECONOMY
AS ON 2015

Submitted to :by :Prof. Harpreet kaur

Raminderjit Singh

Submitted

14
INTRODUCTION
China's socialist market economy is the world's second largest economy by nominal GDP, and
the world's largest economy by purchasing power parity according to the IMF, although China's
National Bureau of Statistics rejects this claim. Until 2015China was the world's fastest-growing
major economy, with growth rates averaging 10% over 30 years. Due to historical and political
facts of China's developing economy, China's public sector accounts for a bigger share of the
national economy than the burgeoning private sector
China is a global hub for manufacturing, and is the largest manufacturing economy in the world
as well as the largest exporter of goods in the world. China is also the world's fastest
growing consumer market and second largest importer of goods in the world
On a per capita income basis, China ranked 77th by nominal GDP and 89th by GDP (PPP) in
2014, according to the International Monetary Fund (IMF).
As of 2014 and the first quarter of 2015 the financial industry had been providing about 1.5% of
China's 7% annual growth rate.
Despite slowing of the economy, as of June 2015 the Chinese stock index, the CSI 300 Index,
which is based on 300 stocks traded in the Shanghai and Shenzhen stock exchanges, had risen
nearly 150% over the past 12 months. In an effort to forestall damage from collapse of a
possible economic bubble fueled by margin trading the central government raised requirements
for margin lending. Economic damage from a crash in 2007-2008 was limited due to margin
lending being highly restricted. In early July, after a fall in the markets of nearly 30% from their
June 12 highs, there were efforts by blue-chip, often state-owned, firms, the Chinese securities
industry, and the central government to stabilize the market by buying back stock and increasing
purchases of the stock of established firms; however, much of the volatility has been in smaller,
less-established firms that had been heavily invested in by unsophisticated, often working class,
investors who had purchased stock based solely on its rapid increase in valuation. 80% of
Chinese stocks are owned by individual investors, many novices. As of July 10, 2015 efforts by
the China Securities Finance Corporation, CFS, a firm created by China's commodities and stock
exchanges to finance trades had apparently stabilized the market. Major Chinese securities firms
were required by the China Securities Regulatory Commission to buy, and hold, a substantial
amount of securities affected by the downturn. Using funds supplied by the central bank and
commercial banks the China Securities Finance Corporation purchased enough stocks to halt the
slide acquiring as much as 5% of the stock in some firms. Lines of credit were extended by CFS

to 21 securities firms, some of which also purchased up to 5% of some companies stocks. Some
of the small cap stocks acquired may be overvalued.
The Chinese stock market crash began with the popping of the stock market bubble on 12 June
2015. A third of the value of A-shares on the Shanghai Stock Exchange was lost within one
month of the event. Major aftershocks occurred around 27 July and 24 Augusts' "Black Monday."
By 89 July 2015, the Shanghai stock market had fallen 30 percent over three weeks as 1,400
companies, or more than half listed, filed for a trading halt in an attempt to prevent further losses.
Values of Chinese stock markets continued to drop despite efforts by the government to reduce
the fall. After three stable weeks the Shanghai index fell again on the 24th of August by 8.48
percent, marking the largest fall since 2007
Chinese stocks fell about 10% during the last week of July 2015 with record breaking losses on
Monday

Objectives of the study :

To study about the past 5 years of Chinese economy .

To study about the bubble crash of Chinese economy .
To study about the domino effect of crash of the Chinese economy .
To study about the methods adopted by Chinese government to recover .
To study about the current position of Chinese economy in global economy .

Research methodology :Research Methodology is a way to find out the result of a given
problem on a specific matter or problem that is also referred as
research problem. In Methodology, researcher uses different
criteria for solving/searching the given research problem.
Different sources use different type of methods for solving the
problem.
In this project report Exploratory Research methodology has been
adopted & secondary data has been used to collect the necessary
information about the topic