CRI听力:Reason Behind the Biggest Plunge of Chinese Stock in 6 Years

Chinese markets suffered a major downturn on Monday, the biggest sinlge-day plunge in six years.

The Shanghai Composite Index lost 7.7.

The Shenzhen Composite Index lost 6.6 percent.

The sharp decline on the markets in China on Monday follows a late-Friday announcement of a crackdown by securities regulators.

The China Securities Regulatory Commission has suspended a dozen brokerages from opening new margin trading accounts for the next 3 months.

Robert Halver is the head of market research at Baader Bank.

"The markets in Shanghai plunged so dramatically because the Chinese want to restrict the shadow banks, as well as speculation with borrowed money. They know that many Chinese indebted themselves beyond reason to massively speculate in equities and there is the danger of forming a bubble that could burst. That would not be not good for the Chinese economy, therefore it is a positive step to limit this."

Among the brokerages being punished, CITIC, Haitong, and Guotai Securities have been banned for allowing traders to repay their credit after their contracts expired.

Margin trading is when brokerages float a line of credit to investors.