The Chinese Stock Crises & Impact of the Weakening of the Yuan on Worldwide Monies – lecture

China looks like it is heading for its version of the 1929 stock market crash. While all Western eyes remain firmly focused on Greece, a potentially much more significant financial crisis is developing on the other side of world. In some quarters, it’s already being called China’s 1929 – the year of the most infamous stock market crash in history and the start of the economic catastrophe of the Great Depression. The dramatic series of government interventions to stem the panic – hitherto unsuccessful, it should be added – would similarly have been up there at the top of the news agenda. China is still essentially a planned and centrally-controlled economy which has so far managed to defy the usual rules of economics. The consensus is that this time will be no different, that even if the stock market does continue to crash, the impact will be no worse than 2007-08, when the Shanghai Composite fell by two-thirds.
The Chinese Yuan devaluation has been the major driver of the massive volatility in the foreign exchange markets over the last two weeks. Asian currencies have been negatively impacted the most due to the perceived risk of an impending currency war. Economies could compete against each other to have the upper hand in elevating export volumes and price value.
In Africa, China’s surprise move to devalue the Yuan this week is a double-edged sword likely to hurt local manufacturers though reducing the cost of consumables. Some analysts fear the devaluation may herald downturn of fortunes for the Orient economy that may cut project financing for Africa. The cheaper China imports, while reducing expenses for African consumers, could pile pressure on an already growing current account balance recently driven by capital goods’ imports rather than consumer goods now expected to become cheaper. Countries like Zambia (copper) and Angola (oil) and Nigeria (oil) may stand to lose a lot more as it will effectively become more expensive for China to buy their commodities and dent their export earnings.
See lecture here