Airing Monday August 24, 2015: The Chinese state media are calling today “Black Monday.” Chinese shares sank to new lows this morning, wiping out all of this year’s gains on the Shanghai market. The Composite index there closed down eight and a half percent, putting Asian and now European markets into a tailspin as investors worried about the effects of a slowdown inside the second largest economy. We consult Marketplace China Bureau Chief Rob Schmitz on the cause of this market free fall.
“Part of this is cyclical,” Schmitz explained, “Friday is a terrible day on the New York Stock Exchange, which is in part a reaction to last week’s poor performance in China’s market. There’s a global market feedback loop.” Anther reason for the crash, Schmitz says, is Chinese investors holding out hope for a government rescue, essentially giving banks more money to make loans. But that hasn’t happened yet.
On Wall Street’s reaction to this news from China, Rob says “people are worried things are about to get very ugly… but I think it’s important to add that many economists are hopeful about how the U.S. economy will fare in the long run despite this Chinese slowdown.”
Click the multimedia player above to hear more Rob Schimtz in conversation with Marketplace Morning Report host David Brancaccio.