by JEROME ROOS
An investor looks at a computer screen at a brokerage house in Shanghai, China, July 8, 2015 PHOTO/Reuters
It has been a dismal start to the year for world markets. After trading on the Chinese stock market was suspended twice last week when a collapse in share prices tripped an ill-conceived automatic “circuit breaker”, the resultant international investor panic knocked more than $2.3 trillion off stocks worldwide – marking the worst start to a financial year on record.
But while China’s stock market turmoil has grabbed all the attention and dominated headlines across the globe, the real threat to the world economy lies not in the country’s speculative stock exchange but in its real economy: more specifically, in its slowing growth, in its collapsing credit bubble, in the extreme devaluation pressures on the yuan, and in the dramatic fall in oil and commodity prices this is contributing to.
This year China is set to post its lowest growth rates in nearly three decades, while the offshore renminbi has just fallen to its lowest level against the dollar since its establishment in 2010. Oil prices are already down 20 percent in the first two weeks of the year amid investor concerns over dwindling Chinese demand. Some now believe the oil price could fall as low as US$10 per barrel.
Seen in this light, China’s stock market meltdown is but a symptom of much deeper problems in the world’s second largest economy – and possibly a troubling sign of what’s to come.
Telesur for more