The Chinese Shanghai Composite stock index fell by 8.5%. This is the second largest drop in the index's history since 1990 and the largest since February 2007.

Photo: REUTERS 2015

The Chinese Shanghai Composite stock index fell on Monday, July 27, by 8.5%. This was the second largest drop in the indicator since its inception in 1990 and the largest since February 2007, writes the Financial Times.

The newspaper notes that the collapse was facilitated by an active sell-off in shares after the government's efforts to stabilize China's stock market failed.

Other stock indices of the country also showed a sharp decline. The Shenzhen Composite Stock Exchange index fell 7%, and ChiNext, considered China's equivalent of the NASDAQ, fell 7.4%.

Shares of insurance company China Life Insurance, one of the largest Chinese banks Bank of Communications and the country's largest coal mining company China Shenhua Energy fell to the maximum daily limit of 10%. Oil and gas corporation PetroChina, China's largest by market capitalization, lost 9.6% of its value, and the largest commercial bank, Industrial and Commercial Bank of China, lost 5.3%.

In total, shares of 1,700 issuers fell on the Shanghai Stock Exchange on Monday, and only 78 rose.

Video: RBC

In mid-June 2015, the Chinese stock market began to crash after 935 days of continuous growth. By the end of the month, the market capitalization of shares traded on the Shanghai Stock Exchange fell by $3.9 trillion, and trading in about half of the nearly 2,800 securities was suspended.

The People's Bank of China, which performs the functions of the Central Bank, allocated $41.8 billion to support the stock market. In addition, the Chinese authorities introduced a six-month ban on the sale of securities of public companies by shareholders owning stakes larger than 5%, and temporarily banned exchange trading in securities of state-owned companies.

As a result of the measures taken, the Shanghai Stock Exchange index resumed growth, rising by 16% from the low recorded in early July.

As the FT notes, despite the 7% growth of the Chinese economy in the second quarter, its prospects are cause for concern. On Friday, July 24, a survey of industrial production was released showing that China's industry continues to experience a decline, and on Monday it became known that industrial profits also fell in June.

The Shanghai Stock Exchange Index fell 8.5%