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    This Day in History: The 2007 China Stock Market Crash

    By Ned Kelly, February 26, 2021

    1 0

    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 中國校正 – 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.

    READ MORE: What to Know about China's Major Stock Exchanges

    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.

    At the beginning of February in 2020, the markets experienced a similar sell-off, with both Shanghai and Shenzhen composites falling nearly 10% on the first trading day after China’s Spring Festival holiday. At the time, the world was watching as China battled the novel coronavirus outbreak, which had taken 300 lives in the country at the time.

    READ MORE: Chinese Stocks Plunge 9%, Largest Since Global Financial Crisis

    For more, This Day in History stories, click here.

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    This was the first time that a top Chinese leader visited America since the founding of the PRC in 1949.

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