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Because the size and relationship of the Chinese stock market to its overall economy is much different than it is in Western, developed economies like the U.S.
Its very different, but I am not sure I agree with the reasoning as much as the article linked would like everyone to believe. There is a lot of weirdness in their marketplace, and I think the impact on their economy is understated. Its not the stock market tanking that is the direct problems, its all the associated associations-like Lehman brothers for our stock market.
And thats why the Chinese leadership is pulling out all the stops to stop the slide. Being a command economy they have a LOT more power to stop the slide, but exercising it just hides the underlying problems making them worse over time. 1/2 the stocks are frozen, and cant be traded, the remainder have draconian laws against major stockholders selling for the next 6 months. Those don't stop the issue, they just push it further down the road.
And theres serious issues in their housing market, their stock market, and all of the interrelated debts at the corporate and local level.
Basically-having the power to keep a bubble inflated doesn't make it a good plan, and when trillions in wealth disappear you can't claim it has effect on the economy.
Our inability to find agreement may lead to the bankruptcy of Greece and the insolvency of its banking system. And for sure, it will be most painful for the Greek people. I have no doubt that this will affect all Europe also in the geopolitical sense. If someone has any illusion that it will not be so, they are naive.
The disagreements are mostly political. There is always the fear by the EU elites to take a step back on integration. The promise of "ever closer union" has to be defended.
It depends on what news you're reading. China & Greece both dominated WSJ's front pages.
I also see this more as "how much exposure" our markets have to both markets. My understanding from reading some news outlets is that many financial services have reduced their exposure to Greek risk over the past many months although the U.S. as a nation holds some risk based on some monies in the IMF. Greece may dominate headlines more because of the effect on the entire Eurozone, in which U.S. financial institutions as well as politics hold a substantial interest.
On the other hand, China's market is known to be controlled by the state so money managers who may take risk in the stock market know at least the risk. Now given the govt's involvement to control free market forces of what naturally happens when margin lending goes out of control to boost stock values beyond actual company values (on top of corruption from insiders of companies), our financial institutions will be even less trusting of their assets to Chinese market volatility.
Its headlines on every market show I have seen from far east to Europe. Its even surmounted Greece in market polls. Perhaps the Op hasn't read the credit rating agencies scalding reports on Chinese government actions. The only reason its not causing a crisis is the government has ceased control of trading and forcing companies to comply with buying their own stocks. Otherwise as described the traders who are 92% reported retail were trading like it was 1928;IMO. They account for 10% of population tho. It was well reported that China markets had gone up 20% days before before for reasons none could really explain.
The real surprise is that the actions taken by the Chinese government recently to stop the crash didnt make headlines.
They demonstrated the power of a command economy to stop a bubble from popping, and attempt to reinflate it. I think in the long term this is not going to be functional (and will in fact cause more damage), but its certainly stopped it briefly.
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