What is the real reason for china's stock market crash (August 2015)? I have read douzons of explanations and they all basically claim the following:


  China's stock market continued to boom despite the country's increasingly gloomy economic outlook, and this eventually created a bubble that popped.


The above sentence cannot be more vague and although everyone claims it's true, no one seems to give an explanation for why it is true.

Why is there a bubble? what is a bubble? Can someone explain to me in more depth how would a booming stock market accompanied with a slow growth economy create a crash?
Stock prices predominantly are a quantification of the company's future growth and profit prospects. These are expectations, and are partly based on how the specific company performs currently and has performed in the recent past, but also on what the "general economic outlook" looks like (expectations again): if it is "gloomy", we expect that this will constrain even the best of companies.

A usual "stock market bubble" is a situation where there is a unabated inflow of new investors (so new money, available to buy stocks, flows in the market), and where the general tendency of the prices of the stocks is to rise, and at a fast rate.

Experience has taught us that even in a sample of a few hundred companies, there is no way that the majority of them will excel in economic performance at the same time. So the "short-term general tendency of stock prices to rise" must come either from positive expectations on the "general economic outlook" (rather than the assessment of each individual company separately), or from a "Ponzi-scheme" climate, which is often the case at least in new stock markets in emerging economies: investors demand to buy stocks simply because they believe they will be able to quickly sell them at a higher price to somebody else, irrespective of what the "economic fundamentals" are, as regards actual economic performance. This fuels stock prices which in turn represent a signal to outsiders that indeed, they too can come in and play this game.

The thing with Expectations is that they may have no inertia: they can swing abruptly. So if in the middle of such a rising-stock-prices trend (which already may not be based on the actual economic performance, as said), comes a change of Expectations for the gloomier, suddenly investors "see" that the prices are over-inflated. The inflow of willing investors to buy at even higher prices suddenly stops, and those with the papers in their hands (but not with the money) start to accept lower and lower prices in order to reduce the damage. And this too happens fast.  And this is when "the bubble bursts".