Even though it is the world’s stock markets now collapsing together, China’s performance on Monday was something notable. Shanghai stocks fell by 8.5% and have now given up all their gains for 2015.

The selling followed weekend news that China’s central bank wasn’t quickly planning to bail out markets again with interest rate cuts or deposit reserve requirement reductions.
Even the state new agency Xinhua–an organ not given to hyperbole when it comes to reporting bad news out of China–dubbed it “Black Monday”.

But it’s not quite 1987. Because only 7% of China’s population owns stocks, and Chinese stock markets remain mostly walled off to foreigners, the reverberations shouldn’t have anywhere the same impact as the Black Monday of October, 1987, when the Dow fell by more than 22%.

Chinese stocks, supported by government policy and an estimated $800 billion in pledged government funds over the past two months, haven’t stopped their rush downwards. Shanghai stocks declined 11.5% last week, and are now 38% off their June peak. At that stage, they were up 60% since January and over 150% in the 13 months since the government had started actively recommending the stock market to mom-and-pop investors.


For now, there’s little evidence the traders in China’s market are anyone but those marginal sellers.

Monday’s selloff wasn’t limited to China. Japan fell by 4.6%, and had opened down before Shanghai even got going.

China is too big and too deeply wired into the rest of the world’s economy for its problems not to be felt outside its borders. Its economy is slowing and there are concerns about capital outflows. It’s the biggest buyer of Chilean copper, Brazilian and Australian iron ore, South African coal, New Zealand milk and crude oil from pretty much everywhere east of Suez. The Wall Street Journal reported over the weekend that China’s central bank is considering injecting more funds into banks for loans and to boost the economy.

No wonder the MSCI Emerging Markets Index was down 4.5 percent.

Since the bubble started to deflate, analysts have been confident that Beijing has, at least in theory, all the tools needed to keep the market orderly and the economy on track for a ‘soft landing’. Days like Monday–when no Chinese official or institution even tried to calm the panic with reassuring talk, let alone action–don’t exactly support that thesis.