Midtown Blogger/Manhattan Valley Follies: Die Welt- The REAL Crisis Comes from China

In Europe there are almost only one topic: Greece. But in Asia is brewing something together that is far more dangerous for the global economy and significant development.

Because in China there are stock prices for three weeks in freefall , and thus increasingly threaten an impact on the global economy. "China is much more important than Greece", therefore warns David Kohl, chief economist of the Bank Julius Baer.

Although the government tried to counteract with ever more desperate measures.But so far these have not succeeded. As a further measure, the Cabinet decided now a renewed stimulus package.

Government boosts economy

250 billion yuan (around 36.6 billion euros) will be directed in particular need of assistance sectors of the economy, especially the construction of roads and other infrastructure projects to be promoted.

But if that helps, is questionable. After the stock market crash in Shanghai and Shenzhen will be more dramatic day by day. So lost the papers in Shenzhen around three percent, in Shanghai almost six percent.

This was the twelfth consecutive day with falling prices. Since mid-June it was thus down by one-third, the equivalent of around three billion euros of investor assets were destroyed - which is ten times as much as the total debt burden of Greece.

And increasingly the crash takes over also.So broke the courses in Tokyo by three percent a, in Hong Kong by as much as eight percent. In both cases Greece was not an issue, only the dramatic developments on China's stock markets caused investors to flee there. "It really reigns panic," said Tony Chu, investment strategist at RS Investment Management in Hong Kong.

The government is trying meanwhile stop with new means the crash. So put the Chinese Exchange trading 500 other equity securities of, after she had taken in the days before similar measures. This can no longer be traded nearly half of all companies listed on the stock exchanges in Shanghai and Shenzhen securities.

Investors plunder their funds

But that only means that the other values even stronger fall in the exchange rate leads. Because many investors pull their money out of funds now. In order to pay off investors, fund managers must therefore sell shares, and they do so now forced increasingly in those values which are still traded.

"It is absurd to stop trading, only because you do not want the prices fall," commented Tsutomu Yamada therefore from market analysts Kabu in Tokyo the government's actions.

The other measures are largely fizzled out in the last few days. So Beijing had stopped all IPOs over the weekend, reducing the transaction costs, promised an intensified fight against market manipulation and insider trading, as well as the large brokerage houses and mutual fund companies obliged to keep their papers or even buy new added. It was no use. On Monday, the price decline continued.

Therefore, the government had then the 111 largest state-owned enterprises and their daughter Firm ends the prohibited sale of shares , shareholders who own more than five percent of a company were to buy additional prompts and the Insurance Supervision increased the share that the insurance companies are allowed to invest in stocks, from five to ten percent. But so far nothing helped this. Whether the stimulus package now ensures the turn to be seen on Thursday.

The worst thing about the unsuccessful rescue efforts for Beijing, however, that this is a Nimbus is destroyed. "There has been a belief in the omnipotence of the government," says David Kohl.

Doubts about the Central Committee

The population, however, many economists and investors have hitherto assumed that Beijing in case of doubt always the power and the ability to have the economy to direct to where it wants them.

That worked so far also usually quite good. The economy grew always quite as strong as it had previously planned the Central Committee. Were to need and the numbers are just as long doctored and manipulated until they fit. But prices on the stock market can not be beautiful. They are set by the free market every second, and it is the government bites the teeth.

"There was a belief that the government can do anything, but is shaken so," said Kohl. And that is all the more significant because the Chinese stock trading is dominated 90 percent of private investors. However, if they no longer believe that the government will judge it, has consequences that go far beyond the stock market.

Especially doubts might arise because the government has the economy continues under control. This in turn would push the consumer mood, which in turn would adversely affect in a vicious circle of growth. And that then would concern also and especially the German economy.

The best example is the automotive industry.Shares of BMW crashed on Wednesday temporarily already by more than three per cent, after it became known that the car sales in China had fallen by 3.2 percent compared to the same month last year in June. Something similar happened to the papers of Daimler .

There are bargain hunters

However, there is at this stage also souls who do not believe in the panic but rather to keep bargains. For in fact are not rated high Chinese stocks. The price-earnings ratio in Hong Kong is less than ten, well below the historical average, even in Shanghai, it is not very high with 17.

Kinger Lau, a strategist at Goldman Sachs in Hong Kong, predicts therefore that the courses at China's stock market will rise in the next twelve months again by a quarter.

He expects the government's actions, the economic growth and fueling confidence the investors will recover. But with each passing day further falling prices should wane such optimism.