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Why China’s market is 10X more important than Greece’s debt

China stocks fall for worst two-day loss in 18 months on brokersChina stocks fall for worst two-day loss in 18 months on brokers

Here’s a math quiz. Which number is larger: $350 billion? Or $3 trillion? The first is Greece’s total debt. The second is wealth that has evaporated from the Chinese stock market in the last month. The difference suggests we are paying too much attention to the wrong thing.

The Shanghai and Shenzen exchanges continued their rout Tuesday, despite heroic efforts to stop them. IPOs have been shut down, short-selling has been banned, more than 700 shares – about a quarter of the market – have been suspended from trading, and, oh yes, a government-backed fund is buying billions of dollars worth of stock.

The parallel here is not recent experience, but 1929. In the year before June 12, prices on the Shanghai exchange rose 150%, driven by a surge of new traders – 18 million brokerage accounts were created since the first of the year, more than in the previous four years combined – and a bulge of debt – margin credit roughly quintupled over the preceding year. Now the inevitable bubble is popping.

Should we care? Maybe not: the Chinese market is largely independent from the rest of the world. But as 1929 reminds, wild swings in markets can have severe economic and political consequences.

In the meantime, attacks on China are becoming increasingly heated in the U.S. political debate. Hillary Clinton joined yesterday, saying China is “trying to hack into everything that doesn’t move in America – stealing commercial secrets, blueprints from defense contractors, stealing huge amounts of government information, all looking for advantage.”

For the Chinese government, rising economic insecurity on the inside combined with heated attacks from the outside make for a volatile mix.