China’s economic slump pushes world economy back to the precipice

China’s economic slump pushes world economy back to the precipice

Investors rout as China loses 8.5% overnight

The Chinese stock market has entered a period of collapse that has pushed them, almost overnight, back into the problems faced by world economies during the 2008 global crash. This has flooded the news and social media in the last few hours, with the hashtag #Greatfallofchina trending on twitter since the early hours of this morning.

China’s stock markets closed this morning 8.5% down from the start of the day, precipitating a knock-on effect that has struck the markets of every country in the developed world dumb and blind in one fell swoop. Australia’s trading closed at 6% down (back to 2007-2008 levels), and our own British share index the FTSE 100 has fallen by 15%, having dropped from a record high in April. Investors are snatching their money back from their Asian investments in sheer panic, and the more that happens, the more the share prices will fall.

The price of crude oil is now back to the level it was pre-recession, at just $39 per barrel, although this is mitigated by the refining companies; they stockpile crude oil at a certain price so as to limit the effects of market forces on their product’s retail value. An indictor of the serious nature of the slump is that the European combined stock figure, known as the FTSEurofirst 300, has taken a substantial hit; the value of Europe’s top 300 companies has been shaved by around £230bn overnight. Chances of interest rates rising (in this country and the US) have decreased significantly; in the UK Mark Carney had been rumoured to be considering a 1% increase in January, with the US predicting a September rise, but this has been rendered “unlikely at this moment”.

The situation is likely to get worse before it gets better, with economists from around the world piling in to criticise the Chinese Government’s handling of the situation. Most of the blame is falling on China’s Leader Xi Xinping for not reacting quickly enough to the market downturn, and for planning to pour more liquidity into the share index, which could drive the Chinese economy even further into the ground, taking most of the Asian markets with them.

The situation is ongoing and moving fast, so we’ll keep you updated here with new developments.

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