The Chinese Correction (simplified Chinese: 中国校正; traditional Chinese: 中國校正; pinyin: Zhōngguó xiàozhèng) was the global stock market plunge of February 27, 2007 which wiped out hundreds of billions of market value.[1] After rumors that governmental Chinese economic authorities were going to raise interest rates in an attempt to curb inflation and that they planned to clamp down on speculative trading with borrowed money, the SSE Composite Index of the Shanghai Stock Exchange tumbled 9%, the largest drop in 10 years.[2]
The plunge in Asian markets sent ripples through the global market as the world reacted to the 9% meltdown in the Chinese stock market.[3] The Chinese Correction triggered drops and major unease in nearly all financial markets around the world.[4]
After the Chinese market drop, the Dow Jones Industrial Average in the United States dropped a staggering 416 points, or 3.29% from 12,632 to 12,216 amid fears for growth prospects, then the biggest one-day slide since the September 11, 2001 terrorist attacks. The S&P 500 saw an even more catastrophic 3.45% slide. Sell orders were made so fast that a second analysis computer had to be used, causing an instantaneous 200 point drop at one point in the Dow Industrials.[5]
Rumors circulated around the world that the drop may have been due to an erroneous trade, but this was never confirmed.
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