http://www.msn.com/en-us/money/mark...rkets-are-going-crazy/ar-BBm2YOk?ocid=DELLDHP
This Started in China, but Is a Lot Bigger Than China
The immediate trigger to the outburst of global volatility was China, where the sharp drop in stocks Monday continued a rout that has been underway — with periodic pauses thanks to government interventions — all summer.
The Chinese economy is slowing, and the 38 percent drop in the Shanghai Composite Index since June 12 is indeed a huge number. There is no question that this giant economy is struggling with a transition from the investment-and-export-led boom of the last generation toward something more sustainable.
But a few facts make China’s problems less satisfying as an explanation for the turmoil across world markets. The Chinese stock market has risen sharply over the past year as millions of middle-class Chinese citizens took to making investments. Even after its steep drop this summer, the Shanghai index is down less than 1 percent for the year and still up 43 percent from one year ago.
There may be a more complex story for why a sharp drop in the Chinese market should cause bigger ripples in the global economy than the sharp gain over the six months that preceded it. The fact that the Chinese government has pulled out unprecedented steps to try to contain the stock market sell-off, to little avail, may suggest limitations on the power of even the mighty Chinese state.
This Started in China, but Is a Lot Bigger Than China
The immediate trigger to the outburst of global volatility was China, where the sharp drop in stocks Monday continued a rout that has been underway — with periodic pauses thanks to government interventions — all summer.
The Chinese economy is slowing, and the 38 percent drop in the Shanghai Composite Index since June 12 is indeed a huge number. There is no question that this giant economy is struggling with a transition from the investment-and-export-led boom of the last generation toward something more sustainable.
But a few facts make China’s problems less satisfying as an explanation for the turmoil across world markets. The Chinese stock market has risen sharply over the past year as millions of middle-class Chinese citizens took to making investments. Even after its steep drop this summer, the Shanghai index is down less than 1 percent for the year and still up 43 percent from one year ago.
There may be a more complex story for why a sharp drop in the Chinese market should cause bigger ripples in the global economy than the sharp gain over the six months that preceded it. The fact that the Chinese government has pulled out unprecedented steps to try to contain the stock market sell-off, to little avail, may suggest limitations on the power of even the mighty Chinese state.
