China's stock market has fallen by its biggest margin in eight years at the end of trading, defying the government's multibillion-dollar effort to stop a slide that has wiped out the gains of this year's price boom.

The plunge on Monday in China's equities followed last week's losses of 11 percent, and hammered stock prices across Asia, as fears grew that a slowdown in China could send the rest of the world into a recession. 

It doesn't seem that they are prepared to really put in a big package of measures, but would rather put in dribs and drabs along the way. 

Rajiv Biswas, economist

The Shanghai Composite Index fell 8.5 percent to close at 3,209.91 points, its biggest one-day loss since an 8.8 percent decline on February 27, 2007. The index is down 38 percent from its June 12 peak.

Analysts blame the fall on both weak onshore performance and investors moving money out of yuan-denominated assets after a surprise devaluation in the Chinese currency earlier in August.

The further decline threatened to weigh anew on global markets after last week's Chinese losses triggered a worldwide selloff.

Meanwhile, Hong Kong's Hang Seng index fell for the seventh straight day, dropping 5.2 percent to 21,251.57 points as Taipei stocks tumbled 583.85 points to 7,203.07 in morning trading, a drop of 7.49 percent.

More than $5 trillion has been wiped off the value of global equities markets since China's shock devaluation.

Many investors had expected the People's Bank of China would over the weekend cut the amount banks have to keep in reserves, which could boost stocks by increasing market liquidity and address weakness in China's vast manufacturing sector.

No such move materialised, and the only policy support in evidence was an announcement formalising rules allowing pension funds to buy stocks, a policy initiative that had already been trailed.

Earlier measures taken

Beijing already carried out rounds of cuts to transaction fees and encouraged companies to buy back their own stock. Such buybacks usually result in increased valuations of outstanding shares by reducing net supply.

Rajiv Biswas, a senior director and economist for IHS Global Insight in Singapore, told Al Jazeera that Beijing needs to do more to prop up the economy.

"It doesn't seem that they are prepared to really put in a big package of measures, but would rather put in dribs and drabs along the way. And that is not convincing anybody that the economy is about the turn around anytime soon," he said.      


China's economy: Back to reality


"One of the problems is that they are directing their efforts towards stabilising the stock market. But we are not seeing enough initiatives to support the real economy,” Biswas added.

“It's the real economy that investors in the country are not confident about. All the signs are showing that the economy is cooling."

Al Jazeera's Adrian Brown, reporting from Beijing, said that malaise on the markets could continue as investors awaited US gross domestic product or GDP figures set for release this week, and a decision on whether the US Federal Reserve would lift interest rates.

Monday's falls followed heavy falls on Wall Street on Friday, with the Dow Jones Industrial Average posting its worst single-day session in four years and all benchmark indices losing more than three percent.

Source: Al Jazeera and agencies