The 2015 Stock Panic of China: A Narrative

14 Pages Posted: 17 Jun 2016 Last revised: 22 Jul 2018

See all articles by Junhui Qian

Junhui Qian

Shanghai Jiao Tong University

Date Written: June 14, 2016

Abstract

This essay documents the boom and bust of the Chinese A-share bubble in 2014-2015. The short-lived bull market started with the expectation of the state sector reform, capital market opening-up, and monetary easing. It was then fueled and heated by the flooding of new investors and the runaway leverage. The regulatory bodies failed to check the leverage in the early stage. Forceful crackdown on leverage, which came too late, finally tipped the market toward a violent crash. The 10% daily trading limits and the voluntary suspension of trading exacerbated the illiquidity problem during the crash. We also document the government responses to the crash and discuss how China may strengthen its financial system.

Keywords: A-share, bubble, leverage, China

JEL Classification: G14, N25, O53

Suggested Citation

Qian, Junhui, The 2015 Stock Panic of China: A Narrative (June 14, 2016). Available at SSRN: https://ssrn.com/abstract=2795543 or http://dx.doi.org/10.2139/ssrn.2795543

Junhui Qian (Contact Author)

Shanghai Jiao Tong University ( email )

1954 Huashan Rd
Shanghai, 200030
China

HOME PAGE: http://jhqian.org

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