Losses on main Chinese main indices were 4.8%. China A50, which includes the leading companies of the Shenzhen and Shanghai indices, is the biggest loser.
The Shanghai Composite lost 3.7% of its value, while the Shenzhen Composite lost just over 4% at the end of the day.
The reasons for the crash are numerous. Chinese investors had to chase their Asian counterparts after a week of losses in Hong Kong, Japan, and South Korea.
The main reason, however, seems to be the pessimism of the markets towards the new stimulus of the Chinese central bank, which will not be able to prevent the commercial war of President Trump causing an economic slowdown in China. The PBOC reduced its reserve ratio for Chinese banks by 1% over the weekend.
According to Business Insider, “Chinese investors were primarily reacting to a week’s worth of news and data, and they have a lot to digest, including the prospect of a slowing and maturing economy and a bubbling trade dispute with the United States,” Fiona Cincotta, a senior market analyst at City Index, said in an email.
“China is moving towards a more mature economic model than the one that has driven its remarkable growth over the past 20 years and has experienced increasing pains in the process,” he added.
The decline in Chinese stocks comes just days after US bank JPMorgan reduced its neutral outlook on the country’s stock market due to the likely negative impact of the trade war on the country’s growth.
“China’s industries such as energy, information technology, and industry will be more influenced by our analysis, while sectors such as real estate, insurance, diversified financials, telecommunications and public services do not generate virtually revenue from the United States,” said a team led by Pedro Martins in a note.