Investors around the world are closely watching the Chinese stock market, which suffered a massive sell-off this week. The Shanghai Composite fell by 8 percent yesterday, and markets in Shenzhen and Hong Kong also fell. In all, the Shanghai composite has lost one-third of its value since June, while the Shenzhen market is down by over 40 percent. All told, Chinese markets are down more than $3.25 trillion. Yesterday’s decline came after the Chinese government attempted to inject money into the markets, ordering government-owned companies to purchase billions of dollars’ worth of stick and the Central Bank cut interests rates to record lows.
International observers note that most Chinese citizens hold their wealth primarily in real estate, so the domestic impact of the stock market declines should be limited. The political impact inside China will similarly be blunted. But the decline highlight China’s slowing rate of economic growth. China is currently experiencing its lowest rate of annual economic growth since 2009, and slowing growth in China is affecting commodity markets for everything from copper to oil.
What do you think? If the Chinese stock market continues its fall, will the sell-off have a domestic impact on China? How might a continued decline affect Chinese politics, if at all? And what might the international impact of a continued decline in Chinese markets be?