Chinese markets steadied on Friday after officials decided to stop using so-called "circuit breaker" tactics aimed at preventing dramatic slides in the stock market. Glitches to the system provoked broad sell offs, and on Thursday, Chinese stocks fell more than 7 percent. Concerns over China's economy (NYT) caused reverberations in U.S., European, and Asian markets. Meanwhile, U.S. and European stocks rose Friday after data showed the United States created more jobs than expected (WSJ) in December.
"At best confidence can return quickly without much effect on the global economic outlook, as it did after last summer’s turmoil also centred on China. But as 2008 taught everyone, once confidence disappears, the effect on the global economy can be massive — potentially bringing down companies, banks, markets and the financial system. It is no wonder economists such as Andy Haldane, Bank of England chief economist, talk about emerging markets as potentially being the third leg of the global financial crisis," says Chris Giles at the Financial Times.
"China’s management of its currency has been fascination for American observers for decades, as economists have long suspected that China undervalued its currency in order to subsidize its manufacturing and export industry. But those fears subsided in recent years, as the Chinese governmentallowed its currency to appreciate as part of a broader effort to rebalance its economy away from relying on investment and exports to one reliant more on domestic consumption," writes Chris Matthews at Fortune.
"The slowing Chinese economy doesn't have to undergo a chaotic collapse caused by financial instability. The authorities have significant policy flexibility and a range of effective tools. The turmoil in the stock market and, increasingly, the offshore currency market, are largely self-inflicted wounds rather than the inevitable consequence of disorderly deleveraging. And the country’s huge financial reserves can limit the effect of recent policy mistakes," writes Mohamed A. El-Erian at Bloomberg View.
CFR-Daily News Brief