The economy is what happens in everyday life.... What happens in the stock market is just a bunch of traders who decide what [price] they want to buy a stock at.
Lee says that a big portion of participants in the Chinese stock market are "retail investors." Retail investors are people like you and me who open their own stock brokerage accounts, as opposed to those who manage money for a living. It's the difference between you and your uncle who works on Wall Street. "A lot of retail investors are not sophisticated investors. They like to jump in if they think that they can make a quick buck. They don't know how to do discounted cash flows or read balance sheets necessarily... They probably use the Peter Lynch way of investing," Lee says.
A lot of retail investors are not sophisticated investors. They like to jump in if they think that they can make a quick buck.
Fact No. 4: When the stock market began to crash in July, the Chinese government tried to control it. "The Chinese government did not want to see their market crash and burn," Lee tells Refinery29. In response, the government took several measures, including encouraging more firms to buy stocks and lifting limits on regulated funds (such as Social Security). "They were doing what they can to try to stop the panic, but once panic sets in, it's difficult to stop it," Lee says. In July, Vox published a great explainer of China's big moves.
The Chinese government did not want to see their market crash and burn...but once panic sets in, it's difficult to stop it.
When China did well, the rest of the world did well, too. Commodities-trading nations like Canada, Brazil, and Australia bolstered their economies by selling to China. At the same time, the growing Chinese middle class became an attractive market for American companies, which found new homes for their goods. Now, Lee explains that China has pretty much outgrown itself.
What you need is another China.