China’s Shanghai Composite Loses 8.5%

China’s Shanghai Composite lost 8.5% on Monday, which ended up wiping out all of the gains that China’s stock market had all year long. The economic woes in China sent the stock markets from all over the world into a huge frenzy, including the United States.

stock market

On Monday, at the opening of the Dow, there was an immediate and unprecedented 1,000 point decline, and the day only continued to be more turbulent afterward. The Dow ended uo closing with a loss of 588 points, which is the worst for the Dow since August 2011. The fears are stemming from the global fears over China’s economic woes, and this is now the second week in a row of turbulence due to China. All of the selling led to the S&P 500 going into correction mode, which has not happened since 2011, and the Dow ended up closing at the lowest level in about 18 months. The scary part was that when the Dow opened and immediately dropped 1,089 points, this was the largest point loss ever during one day of trading, and it even surpassed the 2010 Flash Crash. A lot of marketing strategists are saying that this was the first time there has been a full-blown panic on the markets in a long long time, and it is all due to the Shanghai Composite and the immense slow down of the economy in China. According to Nasdaq, all of the stocks and exchange-traded funds were automatically halted by the stock exchanges more than 1,200 times due to the dramatic decline.

So what is going on with China? All of the madness in America started because of the dramatic selling that was taking place overseas, which happened when China’s Shanghai Composite fell 8.5%, and then the Chinese equities ended up popping too. China said last week that its manufacturing activity, which is one of the biggest and most important metrics on growth, ended up dropping to a six-year low for the month of July. Since China has the world’s second largest economy, a lot of other markets feed off of it, which means that what is going on in China is contagious to other parts of the world. The last 20 years China has had explosive growth, and this has been the driving force for the global economy. Oil, copper, and iron ore are all exported to China because the country is always using the raw materials. In emerging markets like Brazil, this was great news and helped fuel the global economy, because Brazil is rich in many natural resources, especially the ones that China are craving for. Investors from all over the world are now looking at China just wondering how low the stock market and economy is going to go, because China’s economic slowdown seems to be worsening by the day. It is because of these fears about China’s economy that the S&P 500 has now entered into correction territory, and this is a 10% decline from the recent peak it had not too long ago. If you were not aware, the S&P 500 is made up of the biggest companies in the United States. Even the Dow and Nasdaq have now fallen into correction mode, which has not happened since 2011 at all, not even one day.

During the Great Recession in March 2009, the S&P 500 bottomed out at 666, and it has skyrocketed over 220% ever since then. So this is why it is important to keep everything into focus when thinking about China, because it is possible that the markets aren’t quite as bad off as it looks, although it’s still not very good. If there is a long term correction to the markets, then that will be a good thing for the economy, because it seems that there has been a huge rush on the markets which might be a little over-inflated. As far as China goes, it is likely that things are going to continue to get a worse as the days move forward, because there does not seem to be anything coming down the pipeline that is going to stop the slowdown.

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Jeanne Rose
Jeanne Rose lives in Cincinnati, Ohio, and has been a freelance writer since 2010. She took Allied Health in vocational school where she earned her CNA/PCA, and worked in a hospital for 3 years. Jeanne enjoys writing about science, health, politics, business, and other topics as well.