This fall has reversed around two-thirds of the increase that occurred over the previous year. The reasons for this earlier increase are not entirely clear. One possible factor was an easing of some restrictions on margin financing. Another was an expectation by Chinese citizens of future capital gains, perhaps as the equity market opened up to increased investment from overseas.
A third was the weakness in residential property markets. Whatever the reason, as so often happens, things went too far. Many investors thought the increase in equity prices would keep going and many borrowed money to get a bigger stake in what was a rising market. A bubble developed. And then it burst.