Where did all the policies go for China? It seems that the once booming economy of China is treading on dangerous waters. According to money.cnn.com, "China's stock market is in a meltdown."
Can China cope with the failing policies and revive its economy? Much doubt arise in the horizon and according to forexfactory.com, "The main Shanghai Index has fallen about 30 percent since its peak on June 12."
Despite the big intercessions that the Chinese government have implemented, the stock market continues to plunge. What caused the sudden meltdown? Although this is not the first time that the stock market of China crashed, it is still a bothersome situation for the investors and businesses alike. According to mashable.com, "The Shanghai Composite Index, which is China's version of the Dow Jones Industrial Average, dropped a whopping 8.4 percent, which is its steepest one-day fall since 2007."
Yes, it is a fact that China is among one of the world's largest economies, but the nation's stock market is still vulnerable. Various patterns depicts the unstable stock economy of the nation and according to a report by mashable.com, " Those prices have now been crashing down, causing broader concern about the impact a Chinese economic meltdown could have on the rest of the world."
Why did China's investment policies fail? It was unsuccessful to ratify the need. The methods and policies could not cope with the global challenges. According to mashable.com, "The government is working furiously to avert catastrophe in its stock market and the government is doing it the good, old-fashioned way." How? By releasing billions of dollars in cash into the economy.
Why did the plunge occur? Simple, the inflation and deflation pattern explains itself. The decelerating economy of China was its first sign that something is not adding up right. According to mashable.com, "The warning sign is usually followed by the stock market plunging in value."
History has shown the world that when margin lending is implemented, it can lead to devastating outcomes. Margin lending was one of the reasons that the 1929 stock market crash in the U.S. and resulted into the Great Depression as stated in a report by mashable.com. This old fashioned way of dealing with the economic meltdown is also being used by China now.
China needs to pool its resources and opt for policies that are effective in dealing with the stock market crises otherwise, history may repeat itself once more in Shanghai.
