By Victoria McClary, Staff Writer
Slow growth and a rough quarter for the Chinese economy is starting to making other large economies nervous.
The Chinese stock market faced losses in the New Year due to various factors including drops in China’s currency, the yuan, and because China has failed to stabilize their markets. According to Fox News, “the yuan rate was set at 6.5646 to the U.S. dollar, the weakest in nearly five years.” This had an effect on the stock market in the United States. On Jan. 4, “the Dow dropped as much as 467 points before recovering from the lows and ending the day down 276 points. And NASDAQ lost two percent on Monday, the first trading day of 2016, after stocks in China crashed overnight,” according to CNN Money.
The effects of China’s economy are a major gauge for the global economy. According to CNN Money, “there is a risk the global economy could be dragged into a recession” because of the drop. It also has an effect on global consumption of Chinese goods. CNN Money also reports
“the slowdown is hammering commodity markets that had long relied on ravenous Chinese demand for raw materials.”
Due to this, China suspended the use of a “circuit breaker” which slows down the trading process when stocks reach a low in order to avoid a crash. But according to CNN Money, the circuit breakers did not help the stock market since it is extremely “retail driven” with “small investors.” Most of these small investors started to slowly pull out of their stock which eventually caused the record losses. Because of this suspension of the circuit breaker, stocks started to slowly rebound, but did not do much in the way of causing significant stock market gains.
The Chinese Communist Party has tried to reverse this downward trend in stocks. CNN Money reports that “It’s [the Chinese Communist Party] gone as far as halting the stock market for almost an entire day on Jan. 7 to using government money to buy stocks.” But even with these measures in place, stocks have continued to plunge.
