Charles Hedden

China and the Business Cycle

rdr4 - I'm curious as to your background in China.

China and the Business Cycle

It is no surprise that the Shanghai composite is slipping. Yes it was a bubble, at one point it was trading at P/E multiples north of 70. Though the capital markets are not well integrated into the global economy, China's real economy is. As China maintains a tight band against the dollar even amidst its slide (which arguably it must do to maintain a competitive export market) it is generating more domestic inflation than the U.S. economy, add to that the inefficiency of the People's Bank of China's monetary policy tools and a downturn in the economy of its biggest export market, the stock market was bound to slide. This plunge will not likely hurt China's real economy the way a similar equity drop would hurt the U.S. mainly because the average individual's wealth is not that tied to the market as it is in the United States. So the dragon will likely keep charging on, though its stock market may not.