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No Prospect of a Major Slump in China

No Prospect of a Major Slump in China

The Chinese stock market opened 2016 in unprecedented turmoil, with “circuit breaking” triggered in two trading days out of the week’s first four, forcing the China Securities Regulatory Commission (CSRC) to eventually suspended the mechanism. During the first two weeks of the New Year, the Shanghai Composite Index fell by 18%, to its lowest level since August 2015. Together with a sharp fall of the renminbi vs the dollar, China’s market turbulence caused a chain reaction across the world stock markets, with $ 2.3 trillion evaporating during the first week of the year. Pessimism about the Chinese economy spread in the world media. Maury Obstfeld, economic counselor and director of research at the IMF, listed China as the first worry in 2016’s worldwide economic prospects, saying that “the global spillovers of China’s reduced rate of growth … have been much larger than we would have anticipated”.

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