How will the Shanghai drop affect the US economy?

mrearlygold

Mercury10c

The stock market does not affect the US economy. The economy affects the stock market.

Longacre

Here is a report on the reason for the drop:

P.R.C. Capital Gains Tax Rumor Sparks Stock Price Plunge

Stocks trading on the Shanghai Stock Exchange rebounded on February 28 after Chinese officials in Beijing quelled rumors that an antispeculative capital gains tax was on the horizon -- a major contributing factor to the 8.8 percent Shanghai Composite Index drop a day earlier, which roiled stock markets around the globe.
Date: Mar. 1, 2007




Stocks trading on the Shanghai Stock Exchange rebounded on February 28 after People's Republic of China officials in Beijing quelled rumors that an antispeculative capital gains tax was on the horizon -- a major contributing factor to the 8.8 percent Shanghai Composite Index drop a day earlier, which roiled stock markets around the globe.

Many securities analysts are saying the "Black Tuesday" panic across stock markets was caused in part by a Chinese government plan to levy a capital gains tax on retail equity investors.

The Chinese government later said it doesn't plan to levy the tax, which helped Chinese stocks to bounce back nearly 4 percent from their largest losses in a decade, although other markets were still experiencing stock losses. The Chinese government on February 28 also published comments by Premier Wen Jiabao, who said that the government will be working to ensure China's financial stability.

Stock prices and indexes had risen to record highs in several world markets, leading some analysts to believe that share prices had climbed too high too quickly. China is the biggest emerging market, and stocks included in the Shanghai Composite Index had more than doubled in value over the past year. Beijing closes its markets to most foreign investors, however, so many were surprised the Shanghai index's drop of almost 9 percent would so deeply affect stock prices in New York, Tokyo, and elsewhere. The Dow Jones Industrial Average, for example, fell 416 points (3.3 percent) on February 27. The situation clearly illustrates the growing link between the Chinese, U.S., and other global financial markets.

saintguru

Dim Sum prices will drop.

Barndog

<< <i>Dim Sum prices will drop. >>



priced in Euros, however, the price will rise, right?

CarlWohlforth

Hopefully people around the world will remember that owning stocks is risky. So they should re-asses the risks they are taking. Hopefully the Chinese punters will take their loses like sophisticated investors and not panic, protest or rebel. If those things happen world markets will be stronger for it which will eventually be good for the economy.

RedneckHB

The Chinese economy is about the size of California's ans run by communists. Worry about it in 50 years.

Mercury10c

What a coincidence. California's economy is run by communists too!!

WTCG

<< <i>The Chinese economy is about the size of California's ans run by communists. Worry about it in 50 years. >>



California's economy is the sixth largest in the world, but the economy of China is now about the third largest in the world, behind the U.S. and Japan. China is the fastest growing national economy in the world.

Love or hate California, California's economic parameters and regulations are much more liberal than anything in China.

bidask

<< <i> >>

It doesn't matter as long as your diversified.