The news was about “China” is the single most common answer given by those who work in financial markets. They talk about fears of a sharp deceleration in the world’s second largest economy. They see these fears triggering a wave of panic selling from investors around the globe.
Beijing is grappling with the end of a massive credit cycle. It managed to pump up its domestic growth rate in the global financial crisis by ordering its banks to extend a huge amount of credit to property companies.It was one of the biggest explosions of borrowing and investment spending ever seen in a single country in history. But the Chinese authorities are afraid that creating even more debt in this way could lead to a domestic financial collapse, or terrible domestic economic distortions.They are slowing the pace of credit growth and investment and trying to shift the economy into new sources of growth such as consumer spending cutting taxes and lowering interest rates.