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China’s stock market rout has sent global markets into a tailspin, hammered the currencies of resource-rich developing countries and potentially delayed a US Federal Reserve rate rise originally expected later this year.
Below is a visual summary of how the world’s second largest economy hit the buffers.
CHINA’S SLOWING GROWTH
Here are China’s official growth figures (GDP) compared to other measurements that show significantly lower economic activity.
AS DEBT GROWS …
One reason for investors’ worry is China’s enormous increase in debt.
SHANGHAI STOCKS ON THE SLIDE
Part of that debt was invested in the local stock market, which rallied spectacularly at the beginning of the year, then started to drop.
Things started to get really volatile when the government allowed a surprise devaluation of the RMB earlier this month, the biggest one-day currency move since 1993.
So far, China’s central bank has responded to the economic slowdown by cutting interest rates to try and boost lending and stimulate more economic growth. It cut a key one-year lending rate by 0.25 percentage points to 4.6 per cent this week.
The moves have spooked commodity prices, whose prices have been left reeling by falling Chinese demand.
…AND THE CURRENCIES OF COMMODITY EXPORTERS
That in turn has hit the currencies of big resource-rich countries — including South Africa, Brazil, Indonesia and Russia — reliant on Chinese trade.