stock market crash

Originally posted on the Wharton China Business Society blog On Saturday, January 30th, the Wharton China Business Society
SHANGHAI -- "Markets with Chinese characteristics" are as volatile and hard to control as markets with American characteristics. Markets invariably take on a life of their own; they cannot be easily ordered around. To the extent that markets can be controlled, it is through setting the rules of the game in a transparent way. The policy approach China adopts will strongly influence economic performance and prospects worldwide.
In response, the Chinese government has been burning through its reserves at a rapid pace to prop up the yuan - predictably
Protecting the American people from another devastating financial crash and the economic wreckage it causes begins with reflecting honestly about the past and trying to learn the right lessons.
In late August, stock markets around the world saw one of the biggest declines since October 2008. Experts and economists are pointing towards China as the main culprit as they've dealt with a stock market slide for most of the summer.
Regardless of the policy choices that Chinese leaders must face, the average Chinese citizen will not be able to go to the polls. How they choose to voice their frustration and how Chinese policymakers react will be a very interesting dance over the next 18 months.
Chinese-style "manipulation" is clearly a disaster. While it has generated 35 years of stunning economic growth, it has also forced rich people around the world to endure a week-long, anxiety-provoking drop in stock prices!
Markets do fluctuate, but the crash of Shanghai means China will soon need a new development model. And there seems to be no secret Chinese institutional or developmental sauce. China will -- unfortunately -- likely become another corrupt middle-income country in the middle-income relative development trap.
How could a stunning one-day decline in a 2,000 point index be projected within 2 points of the 1971.89 close? How could the Dow's ninth largest point decline ever, and largest point decline since August 8, 2011, be projected within one percent?
Unless you work in finance, just sit tight.