Posted on 02/28/2007 7:12:26 PM PST by TigerLikesRooster
Dispelling the China markets myth
Don't blame Tuesday's sell-off on the Middle Kingdom, says Fortune's Asia editor Clay Chandler, who argues that there is no reason that China should have such a big impact on U.S. trading.
By Clay Chandler, Fortune
February 28 2007: 12:42 PM EST
HONG KONG (Fortune) -- It's the start of a new lunar calendar here in China and what better way to commence the Year of the Pig than with profit-taking stampedes on exchanges in Shenzhen and Shanghai that drag down markets around the globe?
On Feb 27, China's domestic exchanges tanked nearly 9 percent, suffering their steepest one-day fall since the death of Deng Xiaoping in 1997. As traders in Europe woke up to word of China's losses, the UK's FTSE sank more than 2 percent, while the French and German exchanges dropped 3 percent.
In the US, the Dow shed 416 points, its biggest drop since the 9/11 attacks, erasing more than $600 billion in market value in a single day. SARS and bird flu, it seems, are hardly the only forms of lethal Asian contagion.
The grim chain of events, which folks in Asia are (inevitably) calling Black Tuesday, has encouraged a round of bold proclamations about China's emergence as a global financial center and the new 'linkage' between stock markets in China and those in the rest of the world.
The suggestion is that, just as a drop in the Dow routinely has knock-on effects in London and New York, so now with China: Shanghai sneezes, and stock markets everywhere take to their sick bed. But the chatter is getting out of hand.
(Excerpt) Read more at money.cnn.com ...
Ping!
For all the talk of progress, China is still a third world country.
Tom Clancy in one of his books described China as a "Thirty Foot" Country. That is to say that everything looks normal, well made, and modern until you get to within 30'...then you see the flaws.
Seems to be a good metaphor.
"From Whence doest thou come, noble Thane?"
"From Fife, Where the Norwegen banners flaunt the sky, and fan our people cold"
(Just a little bit of MacBeth to keep you happy ;^)
That is an apt description. We can also say that China is a '30 foot superpower' who really believe it is a real superpower.
Those people who blame the drop in the US markets on China are foolish.
That is what will happen eventually. U.S. will undergo 'painful' period, but China may totally 'break down.'
That is the most likely scenario of bringing down Chicom.
Sad thing is that there are many of them, they have advanced degrees to impress others, and they all have lots of face time on mass media.
let the lemmings do what they will do. degree or no degree they are still wrong.
If they move on Taiwan they're likely to find that out the REAL HARD way. Say what one will about the Chinese creating a modern blue water navy, Seventh Fleet is still the biggest and toughest kid on that block. The sharks in the South China Sea and the Sea of Japan are likely to be eating Chinese food for weeks, courtesy of the P.L.A.N.F.
While i certainly agree with your assessment, i do have a wee bit of concern over the amount of US Debt that is currently financed by China. That would REALLY hurt.
How so? (Well, leaving aside the fact that our government takes on too much debt in general). China loaned us a lot of debt at low interest rates. The debt is in the form of bonds, so its not like they can just call the debt. Besides, when this breaks, inflation will go up i.e. we will pay them back in dollars that are worse less than what they were when we borrowed from them.
Cheers!
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