On this episode of China Uncensored,
China's stock markets crash.
And the world trembles.
Hi, welcome to China Uncensored.
I'm your host, Chris Chappell.
Last week, China's stock markets tumbled.
But not to worry!
By the end of the first day,
the government's automatic circuit breakers kicked in to halt trading.
These circuit breakers were put in place as a last resort.
So it's maybe not a good sign that they were triggered twice in one week.
Once on Monday the 4th,
and again on that Thursday
when the stocks fell so much so fast that within 30 minutes,
the circuit breakers kicked in and stopped trading for the entire rest of the day.
Chinese markets had already fallen a shocking 11.6% since Monday's open.
"The government put in place so-called circuit breakers.
But when those circuit breakers were triggered last week,
people were afraid they wouldn't be able to sell later on.
They sold more,
and that shut down trading altogether."
What he means is the circuit breakers actually made investors panic more.
So then authorities got rid of the circuit breakers
the very thing that was supposed to make the markets more stable.
Oh, and the rest of the world panicked, too.
During China's terrible stock market week,
the U.S. Dow Jones and the S&P 500 indices both fell about 5%.
London's FTSE All-World Index that covers 47 countries fell 6.1%
which is the worst weekly fall in that index's history.
Now some of the global markets are back up a bit since then,
but there's still a fundamental problem:
China's stock markets are crazy volatile,
and its huge swings can send shockwaves
--good or bad--
through the rest of the world's markets.
Over the past few years,
China's financial system has been integrated more and more into the global economy.
Like with allowing foreigners to buy Chinese stocks.
Or the IMF adding China's yuan to its basket of important currencies.
And there's merit to this,
since China has the world's second largest economy.
But the Chinese Communist-run government,
on the other hand, well...
they're a force to reckoned with.
"What I think the whole episode has shown,
and the volatility in particular that we have seen,
is that the Chinese authorities are perhaps not in charge of what's going on in the markets.
Yeah, Chinese authorities aren't supposed to have that much control!
Most foreign analysts say China should aim to let stocks take their course based on the
actual market conditions and the economy.
That's the healthiest thing in the long-run.
Chinese authorities artificially boosting the stock markets last year is what got people
into this mess in the first place.
But authorities don't want to let go,
because they're concerned about the impact that a bad stock market
or worse, a slumping economy overall
could have on social unrest.
For example, there were 1,300 strikes and labor protests in China in 2015.
That's a lot,
and it's twice as many as the year before.
And social unrest could threaten the people in power.
Of course, in China, the stock market doesn't really affect the larger economy.
They're not the same thing.
But whether it's a slumping stock market or a slumping economy,
when Chinese people feel insecure about their financial future,
they're more likely to be upset with the ruling Communist Party.
"How come our Chinese markets have become like this?
What's the Communist Party done?
Even if they want to rob money,
they shouldn't be robbing money from our elderly people!"
Yeah! They should be robbing money from someone else! Jeez.
Anyway, China's stock market is extremely volatile.
And authorities don't seem to have the proper tools to smooth it out.
So what will happen?
China's stock market may recover a bit,
then go back down, then up, then down again.
We don't know by how much.
But one thing's for sure:
Whether you're in the US, Europe, or Asia,
your stock markets are going to be affected too, 'cause...
♬ ♬ ♬ "We're all in this together."
So what do you think?
Leave your comments below,
and be sure to like this video and share it with your friends.
Once again I'm Chris Chappell.
See you next time.