More on China's stock market collapse

Daniel Drezner writes at Washington Post,

So while every international affairs pundit and their mother are focused on the travails of an economy the size of Louisiana, the second-largest economy is experiencing a teeny-weentsy stock market meltdown.

Drezner quotes this from Bloomberg:

The rout in Chinese shares has erased at least $3.2 trillion in value, or twice the size of India’s entire stock market.

However, Drezner adds,

This doesn’t necessarily mean that financial contagion will infect China’s real economy. Chinese equity markets are pretty thin and small as a percentage of GDP compared to the developed world. Less than 20 percent of household assets were in the stock market. Financially, it would be difficult to argue that this is China’s Lehman moment.

...Indeed, the China model appears to be failing this stress test. It doesn’t appear that this will have any systemic economic effects — unless this triggers a political shock of some kind. Xi Jinping has spent the past few years centralizing political power to a greater extent than anyone since Deng Xiaoping. It will be possible but difficult for him to fob off blame for this setback onto someone else. And in the mind of ordinary Chinese citizens, Xi’s leadership will not look quite so all-powerful from here on in.

Read more here.