Evaluating China after the crash
There is little panic as jobs continue to be created, although the credibility of policymakers has been undermined.
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THE debacle in the equity market will have limited direct spillover to the real economy. None of the conversations we had in Beijing last week revealed any sense of panic about the economic consequences of the equity market collapse.
This is thanks to the relatively small number of households participating in the market, the short duration of the rally (which helps to limit any wealth effects that arise from the market's fall), and the rather low level of exposure by banks, trusts and securities firms.
Banks and trust companies' exposure to firms involved in the crisis is reckoned by officials to be only 3.5 trillion yuan (S$0.77 trillion), compared to a total balance sheet of 190 trillion yuan; while the stock of margin financing is no greater than 2.3 trillion yuan.
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