The 1979 film The China Syndrome took its name from the darkly humorous notion that a nuclear reactor meltdown in the U.S. would burn straight through the Earth to China.

March 21 – Bloomberg (Luo Jun / Simon Pritchard):

“Deng Yijun, a cargo freight agency manager in Shanghai, faced a dilemma last December. ‘I needed a car, but I didn’t want to use up my savings as the stock market was booming,’ she says. ‘So I used credit cards.’ Deng, 32, was eyeing a Ford Focus that cost about 200,000 yuan ($25,815), roughly equal to her savings. Maxing out three cards, she put 140,000 yuan on plastic and gained 56 days of interest-free credit….. Most of her remaining cash went into stocks… Deng is typical of Chinese who are using easy credit to fuel a stocks boom only briefly deflated last month by government threats to crack down on illegal lending. The willingness of banks to break the law to finance stock trades shows the blunt tools regulators wield as they try to manage China’s markets."
( source link-Prudent Bear)

"We like to buy shares, but when the nanny starts to give out investment tips, you know things have got a bit irrational," said Allan Chan, who like many Hong Kong residents likes to dabble in the market.

Signs of Hong Kong's feverish romance with stocks and shares abound, with an upsurge of small punters enrolling in investment workshops.

The abrupt turn in the markets last week was triggered by a 9% drop on the Shanghai stock market, its biggest fall in a decade. It should have been an insignificant event as Shanghai is a tiny, illiquid market, accounting for a mere 2% of global markets.

But the Chinese sneeze was contagious. Wall Street lost more than 500 points, the FTSE fell more than 300 points and Japan's Nikkei surrendered all the gains it had made since the turn of the year, falling back below 17,000 today.

Analysts said the fall in Shanghai had to be put into perspective of a 107% rise in the last 12 months and expressed surprise at its impact on the rest of the world.

"China's stock market right now is relatively small and not very globalised. So it's not possible for it to have such an impact," said Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC).

Most central banks have invested them in U.S. securities, mostly Treasury bonds, but sometimes mortgage-backed securities as well. In recent years, these giant purchases have helped hold down interest rates that American home buyers pay for mortgages and the U.S. government pays to finance its budget deficits.

If central banks move out of such securities, U.S. interest rates could rise. But moving into equities, which tend to earn higher returns over the long term, poses risks to stock markets.

Chinese Communist Party officials have insisted that central bank officials be paid only civil-service wages, with the result that even fairly senior officials earn as little as $500 a month with minimal benefits.

(Albert interjects: I do not really know how wise it is to underpay people who have control over billions of dollars or any other currency. Wouldn't they sooner or later just rig trades so that could get paid some other way?)

"By contrast, the China Securities Regulatory Commission, the China Banking Regulatory Commission and the big state-owned banks are all permitted to pay wages that are competitive with the private sector, with salary and benefits totaling at least $1,000 a month and sometimes as high as $3,000. This has allowed them to lure managers from the central bank, as well as Chinese citizens returning from overseas with doctorate degrees in economics."

The People's Bank of China has now been given permission to pay wages closer to market levels, but the rest of the central bank still struggles to hire China's best and brightest, said Victor Shih, a China banking specialist at Northwestern University in Evanston, Illinois.