There's been no correlation between China's economic growth and its stock market
Reuters/China Daily
So, naturally, many analysts are now worried a hemorrhaging stock market means that China's economy is on the precipice of collapse.
However, the Middle Kingdom is not necessarily doomed.
As Charles Schwab's Jeffrey Kleintop points out, there has been "no discernible relationship" between China's mainland stock market, the Shanghai Composite, and the growth in its economy.
"Fortunately, the signal being sent by the Chinese stock market crash can probably be discounted based on history. While in many countries the stock market can rightfully be considered a leading indicator of the direction of the economy, that has not been the case in China," according to Kleintop. "This can be seen statistically, in the zero correlation between them over the past 20 years."
Still, that doesn't mean that China's growth will necessarily continue to skyrocket.
"China's growth may slow again in 2016, but is unlikely to experience a 'hard landing' such a growth being cut in half from the 7% GDP reported growth rate for the first half of 2015," he added. "Another year of modest decline in China's growth rate is likely to be the result of slowing manufacturing activity balanced by a more sustainable composition of internal growth."
In any case, check out the chart below, showing the relationship between the Shanghai Composite and China's annual GDP growth:
Charles Schwab
- Love in the time of elections: Do politics spice up or spoil dating in India?
- Samsung Galaxy S24 Plus review – the best smartphone in the S24 lineup
- Household savings dip over Rs 9 lakh cr in 3 years to Rs 14.16 lakh cr in 2022-23
- Misleading ads: SC says public figures must act with responsibility while endorsing products
- Here’s what falling inside a black hole would look like, according to a NASA supercomputer simulation