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.