China’s stock market slowdown – economics or psychology?
Below is an informative video from PBS news in the US. Gwen Ifill interviews David Wessels of the Wall Street Journal about the fall in the Chinese Stockmarket. David Wessels makes one very telling point which refers to behavioural economics:
I think it’s hard to understand in economics. It’s easier to understand on psychology. It’s a kind of panic or a sense that the world economy is just not in as good shape as we thought and so everybody is chasing everybody else.
He also makes the point that by wanting their currency to fall they are worried that domestic consumption is not contributing enough to the economy and that export revenue might make up for this.