This Day in History: The 2007 China Stock Market Crash

By Ned Kelly, February 27, 2020

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On February 27, 2007, the Shanghai Stock Exchange tumbled 9% from unexpected selloffs, the largest drop in 10 years. The fall triggered major drops in worldwide stock markets, including Wall Street, which suffered its largest single fall since 9/11, earning the crash the moniker the ‘Shanghai Sneeze.’

Also known as the Chinese Stock Bubble of 2007 and the Chinese Correction – Zhongguo jiaozheng 中国校正 – the fall was caused by rumors that the Chinese governmental economic authorities were to introduce varying policies that would restrict foreign investment – from capital gains tax to raising interest rates to a clamp down on speculative trading with borrowed money.

The ensuing plunge in Asian markets sent ripples through the global market, as the world reacted to the meltdown, triggering drops and major unease in nearly all financial markets around the world, and wiping out hundreds of billions of market value. The Dow Jones Industrial Average in the US dropped a staggering 3.29% amid fears for growth prospects, with sell orders made so fast that an additional analysis computer had to be used.

Subsequent rumors circulated around the world that the drop may have been due to an erroneous trade, but this was never confirmed. Within three weeks Shanghai had recouped its losses.

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