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Yi Xianrong: China's stock market not world market shaker

By Yi Xianrong (China Daily)
Updated: 2007-03-06 09:28

The author Yi Xianrong is a researcher with the Institute of Finance and Banking at the Chinese Academy of Social Sciences

Just a week ago, the Chinese stock markets plummeted. TheShanghaicomposite index plunged nearly 9 percent and the Shenzhen index dropped 8.5 percent. This was followed by drops in markets globally.

In Asia, the Singapore index wound down 2.29 percent and the Nikkei in Tokyo slid by 0.5 percent.

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In Europe, the British FT index plummeted by 2.2 percent, Germany's Dax dropped 2 percent and Cac in France went down by 2.6 percent.

In the United States, the New York Stock Exchange saw the steepest drop since the September 11, 2001 terror attacks. The NASDAQ, Dow Jones and Standard & Poors all plunged more than 3 percent.

Latin American and African stock markets were not spared.

Many analysts attributed the worldwide shocks to the Chinese stock market's influence on the international market. Some believe the Shanghai stock market slump sent shock waves to the world stock markets, a harbinger of dramatic financial changes. Others argue that the February 27 "Black Tuesday" marked the beginning of China's becoming a world monetary center.

As a matter of fact, the sharp one-day decline in China's stock market was purely an accidental event, in the opinion of this author. Even if this kind of incident happens again, it does not support the argument that the Chinese stock market holds a major place among world markets. China's present economic strength and the ranking of its stock market indicate that the country is far from being a world financial center.

However, I believe that the impact of the Chinese mainland yuan-denominatedA shareson the global stock markets is a manifestation of financialglobalization.

In the context of financial globalization, economic tumult in any small country could greatly impact the global financial market, much more so with economic events in such a big economic player as China.