Difficult times ahead as the Chinese bubble bursts

There are many questions surrounding China’s dramatic stock market collapse, Chinese shares plunged over the last months and have fallen almost a third in value since the June 12th high.  The loss in the value of Chinese companies is estimated to be circa $3 trillion, nearly 20 times the estimated loss of ‘Grexit’ which has been plaguing our headlines for the last few months. 

The Chinese government has been trying everything to stop the market disaster including cutting the cost of money – very similar to what the American’s did during the Wall street Crash by coming off the gold standard allowing the US to print more money. They have also frozen company share prices so no shares can be bought or sold and this has tied up $2.6 trillion of wealth!

Will the world markets ever learn their lesson? The 150% rise in the Shanghai Composite Index was a result of investors borrowing capital to buy shares, the same as before the US crash. This is fine for when share prices are increasing but when they drop geared investments become very dangerous. Similar scenarios occurred in England and Ireland where banks let people borrow too much money, both countries suffered economic downturns as a result.

Andrew Ingram, a surveyor at Morgan Pryce thinks, “there is no doubt the Chinese crisis will be felt worldwide, over $1 trillion has been lent to Chinese public and private companies by foreign banks, hedge funds have billions of dollars exposed to Chinese stocks. Tourism will be affected, export of luxury goods, international schools, property and investment worldwide will all feel the pinch from the Chinese downturn.”

This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.