Whilst markets and the media have obsessed about Greece China;s stock market, and with it the hopes of many middle class Chinese savers, have gone into meltdown.
As the FT reports this morning, more than a third of its value (or $3 trillion) has disappeared in 3 months and more than half the shares in the market are now suspended from trading to prevent further routs. Without government intervention the situation would undoubtedly be much worse.
Now I am aware that the Chinese market is isolated and was massively over-heated, but if you're looking for contagion look further east than Greece. This one is worrying because China is a vastly bigger economy than Greece could ever be, and the impact will be much, much bigger.
The bigger picture is not good. Crashes can still happen and we're almost certainly nearer the next in the UK than we are the last. That's why austerity that destroys our capacity to cope is so wrong.
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Greece has very little if anything to do with the Chinese equity market collapse.
The problem has arisen as a combination of lower Chinese GDP growth causing investor confidence to fall alongside large increases in the margin requirements. Chinese equities are one of the most heavily leveraged markets in the world and it is forcing a fire sale. There are a few more contributing factors, but that is essentially the rub of it – but it’s not Greek contagion.
In fact, most global markets are reacting more to China than to Greece, which is fairly contained. Greece only owes money to the IMF, EU and ECB as private investors have already got out after tkaing their writedowns, so should they default the extent of the damage is already well known.
I never for a momemnt said it was Greek contagion
I said Chian creates enormous risk
Do you really deny that?
And I am saying Osborne will ignoire that real risk
Do you also deny that?
Richard — forgive my stupid question. I don’t doubt what you are saying is happening to the Chinese stock market: but I don’t understand how what has happened to Greece is good news for China?
Most people have missed China because of Greece
That’s the reasoning