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Savon Sanomat - Finland | Friday, July 10, 2015

China's stock bubble may soon burst

The Chinese authorities have used state interventions to prevent share prices on the stock markets in Shanghai and Shenzhen from plummeting. The liberal daily Savon Sanomat explains how dramatic the situation on China's stock markets really is: "The bubble is among other things due to the fact that many companies used their own shares as security for bank loans and invested the money from the loans on the stock markets. The crisis will intensify if the banks decide to call in these securities. According to HSBC bank the Chinese have 15 percent of their assets in shares. If the value of these shares decreases, consumer demand drops. The fact that consumer confidence has decreased rapidly at the same time as economic growth has decelerated shows how dramatic the situation is."

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