China's stock market took another turn for the worse this week, with stocks in the Shanghai composite falling more than 8 percent on Monday and another 1.7 percent on Tuesday. Shares in the smaller Shenzhen exchange were down 2.3 percent Tuesday.
The carnage was distributed across the market — looking at both exchanges, only one of the 111 industries tracked by FactSet pulled through on Monday with a positive return (restaurant stocks grew 1 percent). Eleven industries, including telecommunications, railroads and Internet retail companies, fell by 10 percent or more.
Here's three things you need to know to understand the Chinese markets—and how this slip is different than what's come before.
According to a CNBC analysis of the more than 2,800 stocks listed on the two exchanges, the largest companies saw the biggest losses from Monday's decline. The top 5 percent of companies by market cap fell 1 percentage point more than the rest of the market—erasing about $300 billion in value.
That pattern is different from the most recent crash in June and July, which saw more losses in small cap stocks.
Unlike the U.S. stock market, which tends to respond to the economic state of the country, the Chinese stock market is only tenuously tied to the Chinese economy.
The recent stock explosion seems to be driven by Chinese retail investors, and neither the market's exuberance nor its decline was reflected in other major national indexes like the S&P 500. Even the Hang Seng in Hong Kong, which lists many of the same companies as the mainland Chinese markets, lost only about 3 percent on Monday and actually gained some ground on Tuesday.
Still, there are some signs of contagion: Value in China-based companies with listings on major U.S. exchanges has dropped nearly $40 billion since the markets' peak in June, .
Even with recent losses, the Shanghai composite is still up 68 percent and the Shenzhen index is up 86.6 percent over the last year.
The Chinese stock market is unique in that it is moved more by individual retail investors than institutional investors. The country's hundreds of millions of retail investors trade more frequently than any other group, and more than two-thirds of the most recent group of investors didn't graduate from high school.
Trade volumes and new trade accounts reached record highs immediately before the June-July crash. Many of those day-trading citizens were buying stocks with borrowed money with the implicit understanding that the Chinese government would not allow the market to crash.
The Chinese government has signaled that it will continue to take steps to stabilize the market and reduce volatility, but the public's faith in that intervention may be faltering.