1. Liabilities of China's market plunge
Fast and sharplossesinChinese equitiesmarketshockedthe global marketsonThursday,as
increasingconcernsoverthe secondbiggesteconomycontinuedtopushinvestorsawayfrom
Chinese stocksandincreasingthe markets'turbulentbehavior.The U.S.socksdidn'tstayfar behind
fromthe bearishmarkets.DowJonesIndustrial Averagelost292 points,exactly1.7%,fallingto
16614. The NasdaqComposite declined2.4% andthe S&P500 fell 1.8%.Thursday'smass selloff
startedafterthe Bank of Chinamade the biggestdownwardadjustmenttothe Yuansince August,
sendingthe stockmarketdownwithmore than7% amidincreasingconcernsaboutcapital flight
fromthe Asiangiant. The shortedtradingdayinChinese historylastedonly30 minutesafterthe new
appliedmechanismstolimitvolatilitywastriggeredforasecondtime. The negativismincreasedfast,
spreadingall around.StartingwithJapan'sNikkeiStockAverage,Australia'sS&P/ASX200and Hong
Kong'sHang SengIndex eachlosingmore than2%.
The message thatthe Chinese governmentconveyedwasheardloudandclearandthat message
statedthat all the stimuluseffortsof the governmentare invain.The marketwasshutdownafter
plummetingtonewlows,Beijing'sresponse toshutdownthe marketshowedtheircommitmentto
debase the currencyfurtherasthe lasteffortforexpansionof exports,now angstisincreasing
because due tothe possibilityof Chinanotsustaininggrowthtargetswhiletryingtotransitionfrom
heavymanufacturingtoserviceseconomy.
Since summertime,the primaryreasonforthe surge of the Chinese stockswasthe certaintyof China
continuingtogrowthe economyno matterwhathappens.If these beliefsfadethe investorswon't
deliverandnowwe are witnessing the same thing.Forthe commonChinese investor,whocontrol
the market,thisimpudenteventcausesthemtomassmoneyandtry movingitoverseas.Because
logicallylookingatitthere isno reasonforthemto retainmoneyinChinese stocks,wheretheywill
lose money.

2. The sharp dropsof the currency furtherexposesthe inconsistencyof the Governmentspolicies.
Beijinghaspromisedtoretainthe backbone of the Yuanas part of itsattemptsto make ita reserve
currencyby the International MonetaryFund.Butwhenthe statuswas reached,Beijingdrove the
currencydown.
In orderto be reasonable,Chinese policymakersare inbadposition,since theircurrencyhas
increasedagainstmostof itsglobal competitorsandatsome pointit ran headto headwiththe
dollar,this,inturn, increasedthe exportsexpenses.Theystartedtodevalue the currenciesshortly
aftertheyshifteditsbenchmark,whichgivesmore flexibilitytothe currency,butwhenthe currency
devaluesitruinsthe investorstrustinChina'seconomy.Earlier,Beijing decidedtoboostthe
economyinan efforttosolve some of itsdebtissues,byforcingarallyon the stock market.When
thisplancrashedand burnedtheyturnedthe othercheekanddecidedtomake the Sockmarket and
the economystable while slowlygrowingthe economiessize bydrivingthe Yuandown.The problem
withthe laststrategyis that whenyouhave weakcurrencythismakesinvestorsuneasytoowna
stock inthe same economy.
But the problemswiththe policiesof Chinadon'tstopthere.Forexample,all tradinginChinagets
shutdownif the marketdropby 7%. While thismeasure wasthisweek`ssaviorforkeepingthe
marketinline withWesternmarkets,Beijingdidn'taccountforthe marketsunpredictable swings,
cause by volatilitythankstothe 7% marketshutdown.Justinthe firsthalf an hourof tradingon
Thursdayall tradingwas suspended. Unlike the U.S.marketwere the dropmustbe at 20% inorder
for the marketto shutdownfor the day. Wheninvestorssee asharpdecline,will cause the increase
inselloff bydumpingsharesbefore the marketscloses,andthusleavesnotime forareboundto
occur. Plusthere are alsobillionsof outstandingmarginloanswhichincreasedthe drop.