"U.S., world stock markets slide as panic in China spreads"
https://www.washingtonpost.com/world/china-stocks-plunge-7-percent-triggering-another-market-closure/2016/01/07/d6a83bf5-10b2-4289-8aab-98e485a3fe6e_story.html
Summary:
China’s economy is slowing down and this is causing for it’s stock market values to drop. Thought this is more likely to be felt in Europe than the United States, it shows “how interconnected the United States is to the global economy”. Many people are saying “Don’t panic” because when people panic, it just makes the situation worse. The People’s Bank of China set the yuan’s official midpoint range to roughly 6.57 to the dollar, which is down 0.5 percent weaker than the day prior and this has reignited fears that China is devaluing it’s currency to stimulate exports, possibly provoking other countries to do the same. Wu Xianfeng, president of Longteng Asset Management, in Shenzhen, agreed with Andy Xie, an independent economist based in Shanghai, that the market was overvalued. A circuit breaker system was put in place intended to help the stock market stabilize if it fell too much however, this just caused people to panic and sell while they still could and caused them to rush it even more. China’s regulator announced it would suspend the breaker system starting Friday, after it failed to stabilize the market. China Securities Regulatory Commission, CSRC, created a rule that major investors could sell no more than 1 percent of a company’s shares on the open market every three months. The risk of China’s problem spreading across the globe resurfaces. It is very similar to the Market move in August. The World Bank cut its global growth forecasts for this year and 2017. The market should have expected a yuan devaluation after the central bank said it would be targeting the yuan’s value against a basket of currencies and, “So yuan weakness against the dollar should not be seen as evidence of weakening Chinese growth, but of the global economy returning to a sustainable equilibrium”. Also, big moves in China equities may grab the headlines however, equity prices tells us next to nothing about the outlook for corporate earnings. Even in China.
China’s economy is slowing down and this is causing for it’s stock market values to drop. Thought this is more likely to be felt in Europe than the United States, it shows “how interconnected the United States is to the global economy”. Many people are saying “Don’t panic” because when people panic, it just makes the situation worse. The People’s Bank of China set the yuan’s official midpoint range to roughly 6.57 to the dollar, which is down 0.5 percent weaker than the day prior and this has reignited fears that China is devaluing it’s currency to stimulate exports, possibly provoking other countries to do the same. Wu Xianfeng, president of Longteng Asset Management, in Shenzhen, agreed with Andy Xie, an independent economist based in Shanghai, that the market was overvalued. A circuit breaker system was put in place intended to help the stock market stabilize if it fell too much however, this just caused people to panic and sell while they still could and caused them to rush it even more. China’s regulator announced it would suspend the breaker system starting Friday, after it failed to stabilize the market. China Securities Regulatory Commission, CSRC, created a rule that major investors could sell no more than 1 percent of a company’s shares on the open market every three months. The risk of China’s problem spreading across the globe resurfaces. It is very similar to the Market move in August. The World Bank cut its global growth forecasts for this year and 2017. The market should have expected a yuan devaluation after the central bank said it would be targeting the yuan’s value against a basket of currencies and, “So yuan weakness against the dollar should not be seen as evidence of weakening Chinese growth, but of the global economy returning to a sustainable equilibrium”. Also, big moves in China equities may grab the headlines however, equity prices tells us next to nothing about the outlook for corporate earnings. Even in China.
Impact Statement:
This is important in the world today because back in 2008, there was a recession due to a fall in the stock market, which heavily affected the United States and is still having in impact to this day. This stock market fluctuation in China is very similar to what happened before the Great Depression, stocks started to dip and everyone panicked and pulled out their money as fast as they could, causing the stocks to fall faster and further. This is important to know about because this will affect our lives and the lives of those that come after us. It’s our job to maintain a healthy economy and help the economy grow. Recession is a natural part of the economy, but that also means that people shouldn’t be afraid of it.
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