China’s Big Economic HiccupPlay
China’s stock market meltdown and its deeper economy. A bubble correction or signs of something more serious?
If it weren’t for the drama of Greece and Iran and South Carolina, the big story of the summer of 2015 would almost certainly be China and its wild stock market. The Shanghai Index, up over 150 percent in the year to early June. And crashing down a full third in the weeks since then. The government in Beijing intervening like crazy to halt the slide. Pumping in an ocean of cash. Suspending trading in a thousand companies. China’s economy is more than its stock market, but the whole world’s been watching. This hour On Point: China’s wild ride, and consequences for the world.
-- Tom Ashbrook
Eswar Prasad, professor of trade policy at Cornell University. Senior fellow at the Brookings Institution. Former head of the International Monetary Fund's China Division. (@eswarsprasad)
William Kirby, professor of business administration at the Harvard Business School. Professor of China studies at Harvard University.
From Tom’s Reading List
The Wall Street Journal: The Myth of the China Crash -- "On a superficial level, the belief that a slump in China will affect the rest of the world is understandable. In addition to its economic size and importance as a trading partner to every major economy, China is also the leading manufacturing country by volume. It is hard to believe that an economy that constitutes just less than half of all global growth can sink without creating tsunami-like impacts in every corner of the globe."
The Economist: Uncle Xi's bear market -- "For the government, the fall is damaging. Officials are seen to have promised the population a bull market, only to lure them into a bear trap. A flourishing of gallows humour in mobile-phone chat groups captures the sentiment. 'Friends, don’t run, we’re here to save you,' cry the valiant soldiers in one joke, representing the state coming to the aid of the beleaguered market. Their refrain soon turns to, 'Friends, don’t run, or we’ll shoot you.'"
Marketplace: Chinese tech companies hit hard in stock crash — "The center of the euphoria, Shenzhen, has been hit the hardest. Likened to the NASDAQ, the Shenzhen market has smaller, more entrepreneurial companies. At the height of the boom, these Shenzhen tech companies were the poster-children for entrepreneurialism and getting away from state owned enterprises. However, now 'they are faring worse' says economist Chris Low. And they may need some help from the Chinese government."
This program aired on July 15, 2015.