China’s Rigged Markets Will Ultimately Destabilize Global Capitalism
The recent upheavals in the Chinese stock market may be limited for now, but if left unchecked, China’s economic power will become a genuine threat to global financial stability.
A woman rubs her face as she stands at a computer terminal in a stock brokerage house in Nantong in eastern China's Jiangsu Province, on July 8, 2015. Chinatopix via AP
NEW YORK—The recent Shanghai market collapse and Beijing’s efforts to engineer a strong stock rally to reverse it have had quite limited effects on Western markets. Going forward, however, the fallout from the Chinese government’s market meddling will likely be less benign.
Unlike Western corporations, Chinese businesses are much more dependent on bank financing than selling stock to raise capital. And ordinary Chinese workers have more of their savings in banks and less in equities than Americans.
Peter Morici, professor at the Robert H. Smith School of Business at the University of Maryland, is a recognized expert on economic policy and international economics. Previously he served as director of the Office of Economics at the U.S. International Trade Commission. He is the author of 18 books and monographs and has published widely in leading public policy and business journals including the Harvard Business Review and Foreign Policy. Morici has lectured and offered executive programs at more than 100 institutions including Columbia University, the Harvard Business School and Oxford University.
