China stocks drop over 8%

Re:China stocks drop over 8% by irln on Monday July 27, 2015 @10:09AM (#9955260)

With respect to "China's reaction is more panic-driven", check out the following three charts of US Fed policy which I would argue were "panic-driven" based upon magnitude of the intervention when compared historically.

It remains to be seen to what affect recent US Fed policy will do long term, however, I would argue that it was definitely a panic driven reaction.

I provide this not in support of China's policy but for context.

Excess Reserves https://research.stlouisfed.org/fred2/series/EXCSRESNS

Overnight Rate https://research.stlouisfed.org/fred2/series/FEDFUNDS/

Federal Reserve Balance Sheet https://research.stlouisfed.org/fred2/series/WALCL

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Re:China stocks drop over 8% by yokohama11 on Monday July 27, 2015 @02:10PM (#9956921)

I think the better statement would be that it was a panic, but one with very different and more practical goals.

The US government was primarily trying to keep some big companies and banks that were caught in a liquidity crunch from going bankrupt, because them all going under would likely be a spiraling problem. The crisis solution was also rather simple in aggregate...loan them a bunch of money temporarily until they could free up the assets to repay it.

China is currently trying to prop up a stock market that is STILL (even with today's decline), up 50% in a year for no reason. And most trading in the market is done by very jittery small investors (who are also overleveraged and now desperate to get out) rather than big firms and funds. Said small investors are unlikely to be reassured by anything the Chinese government can possibly do. I don't see great chances for the government to be able to stop this from returning to a more realistic valuation.

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