Here are the list of reason why China stoke markets crash down so badly:
- According to a research, Chinese investors are highly leveraged. By some estimate, a 30% loss in market index could translate into a 60% loss to the average investor.
- The growth engine for the Chinese economy is domestic consumption, not export or investment any more. Domestic consumption has been growing 10% a year in the past few years, you bet it’s going to be affected by the market crash.
- There are 90 million stock investors in China, larger than the entire communist party membership.
- Chinese investors are panicking, fearful, resentful, restless. As they have been conditioned to believe in the party, now they are blaming the party for their losses.
- The specter of massive single issue social unrest can not be ruled out. China is the second largest economy in the world, and the biggest growth engine, should a massive unrest breakout, the effect will reverberate across the Pacific.
- Before the recent 30% tumble, the Chinese market has gone up 150%. Even after this massive tumble, it’s still up about 70% from a year ago. So maybe not all investors lost money.
- The Chinese stock market, like its internet, is walled in. Foreign investors can only invest in Chinese shares in the Hong Kong market, which is much more mature and stable. This has the effect of containing the economic disaster within China.
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