Sébastien Le Belzic, the correspondant for France24 in Beijing, analyzes the fall of the composite Index.



However what was supposed to be a deceleration of the economy has turned into a drop, surprisingly led by stocks that should be benefiting from China hosting the Games. "Before the beginning of the Olympics, many investors were basing a lot of hope on these stocks," says Mao Nan, analyst at Orient Securities, "however they have been disappointed by the performance of these companies since the opening ceremony, and have started selling.

"Stocks like Chinese brewer Yanjing, property developers such as China Vanke or Poly Real Estate, as well as companies related to tourism and transport, like Air China, have all helped drag down the market. All expecting a boost to profits from the so-called "Olympic Effect", but all now suffering a drop in their share price, with some stocks falling as much as 11%.

Investors and analysts now believe that some of these companies have invested too much in the lead up to the Olympics, with no returns expected in the short to medium term. One example is in the real estate sector, where many firms invested large sums of money, expecting a major take up around the Games. However, large swathes of business and residential property remain empty and prices have fallen some 7 percent since the beginning of the month.

Anti-pollution measures, including the closure of hundreds of factories around the capital, have also contributed to the slowdown in economic activity, with Beijing accounting for a quarter of China's industrial output.

The Olympics cannot be blamed for everything though. Many analysts see the latest fall as a continuation of a correction that started towards the end of last year, after China's stocks doubled in value during 2007. However, despite China's shares losing 50% of their value so far this year, the world's fourth largest economy is still going for Gold."