Why have global shares plunged over China’s slowdown?

A man watches electronic boards at the Australian Stock Exchange (AP Photo/Rick Rycroft)
A man watches electronic boards at the Australian Stock Exchange (AP Photo/Rick Rycroft)
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Global shares have plunged amid market panic over China’s slowdown. Why has this happened and what does it mean?

What is behind the panic?

China’s rapid growth has slowed, leading Beijing to devalue the yuan to try to help exporters earlier this month. But the regime has been unable to stem heavy declines in the Shanghai stock market and some say attempts to intervene have backfired by lifting anxiety.

:: What has triggered the latest big fall?

Bleak manufacturing figures from China, the world’s second biggest economy, prompted a steep shares fall on Friday. It was followed by the biggest decline in Chinese stocks for eight years on Monday, and a wave of selling across the globe.

:: Why are markets so concerned?

Some say it is because, unlike in previous bouts of economic weakness, central banks now lack the firepower to step in and stop the rot. This is a worry because ultra-low interest rates and money-printing underpin recoveries in Europe, the US and the UK.

:: What does it mean for people in Britain?

Monday’s rout saw £74 billion wiped off the value of the UK’s top 100 listed companies. This affects millions of people who have money tied up in pension funds as well as those with other stock investments.

:: Will it affect the UK in any other way?

Petrol prices could be cheaper, as oil has also slumped - adding to downward pressure on inflation, already near zero. That could push back the timing of an interest rate hike, currently expected early next year - good for borrowers but bad for savers.

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