The New York Times writes about fears that the sudden downturn in China’s stock market will create instability in the run-up to the Olympics:
This country’s young stock market, which only came into being in 1990, has been prone to frenzied and hysterical buying and selling. Big price swings are closely watched, not just by economists but by political analysts as well.
And the latest evidence is not good. Investors sold furiously on Tuesday, compounding losses from a huge sell-off in Asia and Europe on Monday, while markets were closed in the United States for the Martin Luther King Day holiday.
The Shanghai composite index dropped 7.2 percent Tuesday to close at 4,559.75; the Shenzhen composite fell 7.7 percent; and the Hang Seng index, the bellwether of the much longer-established stock market in Hong Kong, plunged 8.7 percent to close at 21,757.63, down by nearly one-third from its high of about 31,600. [Full text]
Meanwhile, an article in China Daily links the sell-offs of stocks to fears of a impending recession in the U.S. See also “A Crash Is China’s Chance For Reforms” by Minxin Pei and Wayne Chen, posted earlier today on CDT.