Saw this this morning:
http://www.huffingtonpost.com/2015/07/08/china-stock-market_n_7752190.html
I was unaware that the Chinese stock market was having this kind of difficulty. I'm not sure what this portends - is this just a normal, cyclical market correction? Or is this a recession/depression type event?
I read/watched a bit on CBS's 60 Minutes a few years ago about the housing market in China. Here's a link:
http://www.cbsnews.com/news/chinas-real-estate-bubble-11-08-2013/
Essentially what's happened is that the government in China has encouraged speculation in real estate, it being one of the few places where one can invest one's private money. This creates an artificial construct (if you'll forgive the terrible pun) where costs are not the same as actual value.
China has had an interesting modern history with the free market. The Opium Wars in the early to mid 1800s were a series of battles fought to keep the Chinese markets open. Even then, China was recognized as the largest market in the world, both in terms of production and consumption. The problem was that England wanted Chinese tea, but there was a trade imbalance, exacerbated by the fact that England doesn't produce anything that China wanted. So they started producing opium in India and started peddling that in China. When the Chinese government objected, the British East India Company complained and the British Navy was sent to ensure the availability of the Chinese market.The resulting treaties were heavily skewed in favor of the British, and set up a second war fought for much of the same reasons and with much the same result.
This led to a significant decline in the authority and autonomy of the Chinese imperial government, and probably led directly to the reforms 50 years later, which made China divided and weak, and ripe for the invasion of the Japanese into Manchuria and later the whole country. This led to the republic and communist regimes set up (under General Chang and Mao, respectively), and the subsequent history of the world...
In light of all of this, and understanding that Chinese collective memory is very long indeed, I think it's clear that there would be some lingering distrust of free markets. And yet, as the burgeoning middle class in China finds itself increasingly independent and wealthy, and educated, they're wanting to find a place to invest. This is ALWAYS a good thing - it spurs growth, encourages entrepreneurship, and shows cultural and psychological investment into one's society. In fact, the Great Depression in America was caused by a lack of confidence and investment, not a lack of capital.
Hopefully this is not the case in China, and the current downturn is just a normal market correction. It remains to be seen, though, what impact this may have. With tensions relatively high in the Spratlys, and with other global economic and military crises, this is not a good time for the world's largest producer and consumer to be having heartburn...
http://www.huffingtonpost.com/2015/07/08/china-stock-market_n_7752190.html
I was unaware that the Chinese stock market was having this kind of difficulty. I'm not sure what this portends - is this just a normal, cyclical market correction? Or is this a recession/depression type event?
I read/watched a bit on CBS's 60 Minutes a few years ago about the housing market in China. Here's a link:
http://www.cbsnews.com/news/chinas-real-estate-bubble-11-08-2013/
Essentially what's happened is that the government in China has encouraged speculation in real estate, it being one of the few places where one can invest one's private money. This creates an artificial construct (if you'll forgive the terrible pun) where costs are not the same as actual value.
China has had an interesting modern history with the free market. The Opium Wars in the early to mid 1800s were a series of battles fought to keep the Chinese markets open. Even then, China was recognized as the largest market in the world, both in terms of production and consumption. The problem was that England wanted Chinese tea, but there was a trade imbalance, exacerbated by the fact that England doesn't produce anything that China wanted. So they started producing opium in India and started peddling that in China. When the Chinese government objected, the British East India Company complained and the British Navy was sent to ensure the availability of the Chinese market.The resulting treaties were heavily skewed in favor of the British, and set up a second war fought for much of the same reasons and with much the same result.
This led to a significant decline in the authority and autonomy of the Chinese imperial government, and probably led directly to the reforms 50 years later, which made China divided and weak, and ripe for the invasion of the Japanese into Manchuria and later the whole country. This led to the republic and communist regimes set up (under General Chang and Mao, respectively), and the subsequent history of the world...
In light of all of this, and understanding that Chinese collective memory is very long indeed, I think it's clear that there would be some lingering distrust of free markets. And yet, as the burgeoning middle class in China finds itself increasingly independent and wealthy, and educated, they're wanting to find a place to invest. This is ALWAYS a good thing - it spurs growth, encourages entrepreneurship, and shows cultural and psychological investment into one's society. In fact, the Great Depression in America was caused by a lack of confidence and investment, not a lack of capital.
Hopefully this is not the case in China, and the current downturn is just a normal market correction. It remains to be seen, though, what impact this may have. With tensions relatively high in the Spratlys, and with other global economic and military crises, this is not a good time for the world's largest producer and consumer to be having heartburn...
Comments