http://www.vox.com/2015/7/7/8910293/china-stock-market-crashhttp://www.vox.com/2015/7/8/8913885/china-stock-market-newshttp://www.bloomberg.com/news/articles/2015-07-08/china-trade-halts-hit-2-2-trillion-as-state-intervention-failshttp://www.washingtonpost.com/posteverything/wp/2015/07/07/the-politics-of-chinas-stock-market-collapse/Apparently, China cottoned onto the notion of borrowing money to buy stocks. As long as stocks were going up, it was free money. Of course, that's how the Great Depression was triggered. Because eventually, stocks take a minor downtick. People panic to sell the stocks to not take a loss or limit their loss, which drives down prices, repeat. Trading on margin is about the highest risk you can possibly take. IMHO, it's even riskier than shorting stocks. The PRC government ordered no new major IPOs and for major investment companies to buy stock regardless of consequence. The PRC central bank is "printing money" to give to their official investment company to artificially inflate stock prices. Several companies suspended any stock trades to prevent price drops. PRC govt also ordered major shareholders to not sell any shares.
None of which worked. Though prices have rebound a bit in last day or two.
Long and short of it all is China has a ton of unused/unusable overcapacity and debt. Think lots of ghost towns, ghost ports, ghost highways, ghost factories, etc built entirely with debt, in order to inflate numbers and not actually do anything. So, think tons and tons of debt. While folks started majorly over-leveraging themselves to buy stock with money they don't have to buy stocks for over-leveraged companies.
It's not the end of the world for China, unlike for Greece. They're still exporting more than they import, and have insanely huge reserves. Like $4 trillion in reserves. Which is more than the current US budget for 2015 ($3.8T). Granted, having $3T disappearing from your stock market is going to hurt. And their stocks are still insanely overvalued (a glance at P/E makes that clear as day). Price-earnings ratio of the SCI is 26. 10 is healthy.
Best news is this will drop the price of commodities across the board. Prices of raw materials will drop. Dunno about finished good prices, but it can't hurt. Ultimately this is a necessary price correction which will make China more financially stable in the future, and will allow US companies to make stuff for cheaper.
