Are the Global Markets Right to be Concerned about China?
China’s influence on the global business environment, economy and markets has been thrown into stark relief by events during the past two months. While China’s recent stock market volatility was initially largely only felt internally, it eventually triggered a sell-off that erased more than US$5 trillion in value from stocks globally in the space of two weeks in August. All eyes are now on President Xi Jinping and China’s policy-makers to see how they will address the current stock market events and, more importantly, how they will try to restore greater confidence in the Chinese economy that is decelerating before its rebalancing has properly begun.
This paper explores what the market volatility and government policy responses say about the state of China’s economy as well as the potential impact of the economic challenges on businesses both inside and outside of China. It examines why a stock market correction in China has precipitated a significant reaction in global capital markets and also discusses potential ramifications for China’s reform agenda. In addition, it addresses what companies that have business interests in China should be considering given recent events.