China contagion : can it spread

So far as the stock market acts as a barometer of the economy its correction and subsequent reaction of the Government   reflects the following :

1. China cannot keep  growing at the same pace 
2. The housing bubble and the equity bubble is about to burst 
3. Chinese Government will do their best to avoid any hard landing 
4. Flight of foreign capital from China may have already gained momentum . 

Having said that ,  it was apparent  that CHINESE STOCK  market has lost its touch with reality . The signs of the huge manufacturing machinery of China slowing down was all across the place . 

• The commodity prices was crashing. 
• Chinese imports were coming down 
•  Capacity utilization of China's heavy industry was falling 

However it was expected that China will have a soft landing which was well planned , without any contagion effect on other markets . 

When it became apparent that the landing will not be that soft investors started to panic,

However China has deep reserves and strong central control . They may not grow at the same pace as in the past , but they will continue to grow and prosper . 


Unless the contagion spreads to other markets and situation worsens , things are under control . We have to keep a close watch on China economy for clues of the future direction . 

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