China Chart Check: The People’s Republic’s wild market ride

June 24, 2013
June 24, 2013

China is showing signs of stress this morning after the central bank issued a terse statement telling bankers to shape up and stop counting on perpetual money printing.

Chinese stocks tanked. The Shenzhen A shares fell more than 6%. The Shanghai Composite index, pictured below year-to-date, was down more than 5%, falling below 2,000.

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Of course, a lot of the the worries center on the stability of China’s banking system. China’s government-controlled version of Libor still shows that conditions in the interbank lending markets are a bit tight. Still, rates have declined since last week, showing some improvement.

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As the US learned during its financial crisis, it doesn’t take long for problems in the banking system to bleed into the overall economy. Copper has been something of a proxy for Chinese growth in recent years. Prices for the industrial metal tumbled to its lowest price in nearly three years.

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There are emerging doubts about how all this will effect the fiscal health of the world’s second largest economy. The cost of insuring against a default on Chinese government bonds has jumped over the last few days. Here’s a look at five-year credit default swaps on China.

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