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China's Stock Crash: $3.5 Trillion Wiped Out, $2.6 Trillion Frozen
An anonymous reader writes: The stock market crisis going on in China is notable for the huge numbers involved. $3.5 trillion ($3,500,000,000,000) in value has been wiped out by falling prices, and over a thousand companies have forced a pause in trading. The combined value of all of these companies exceeds $2.6 trillion, and it represents about 40% of the total market capitalization. This follows attempts by the exchanges and the government to instill confidence in trading once more, but investors are still wary. The NY Times has a detailed explanation of how the market got into trouble, and why it's not likely to fix itself overnight: "Put all these pieces together, and here's what we have: a rise in Chinese share prices in the last year that seemed to be driven more by investor psychology than by anything fundamental. It is hard to see how the prices as of a month ago were justified, and easy to see why the sell-off of the last month would occur. That, in turn, implies that Chinese officials are fighting an uphill battle in their policy moves to try to stop the correction, and helps explain why their policy actions have had little effect so far."
Fortunately for China, this is a bubble that formed as the usual speculative excess on top of a building boom. Unlike our own latest market bubbles, the Chinese boom has created enough durable infrastructure - dams, power plants, rail lines, freight terminals, water systems - that the financial effect of this crisis will be muted and temporary. For years now, China has done all the building we have not been able to break ground on. China can build bullet train lines thousands of miles long, while we can't even start a research telescope.
When our current tech bubble pops, the dollar will have been backed up by...social media apps?
Posting anonymously for reasons that will be clear in a moment...
I work at a company that manufactures large items made from steel. Many companies in China, and the Chinese government itself, are customers of my employer.
Every contract we receive from China or Chinese companies has a clause that demands our company to certify that our products that will be delivered to China contain no Chinese-made steel.
I find this very interesting, indeed.