The world’s stock markets started to panic in a year. The reason, like six months earlier, was a decline in the Chinese stock market, which caused a chain reaction in New York, Berlin, Tokyo. The US and French stock market lost five percent of the value. Wall Street did not record such a fall in the last 119 years – the worst result since 1897.
Economists argue whether it is transient instability or a new wave of the crisis, such as the 2008 one, according to US stockbroker George Soros.
The situation on the stock exchanges is improving, which indicates that the announced crash probably will not happen. But what is the cause of this global instability?
The instability in the world markets indicates that there is no international cooperation and that the G20, an organization designed to find an international response to financial crises and playing the role of an economic regulator, has lost meaning.
The new geopolitical reality requires new institutions, since the forms of global economic management so far proved unsuccessful. China, Russia and other economically important forces determined to break away from American domination have formed BRICS, the Eurasian Union, the Asian Investment Bank, which are changing the world’s economic architecture.
Economic crises are following the world economy from the 1970s to the present, from the 1975 oil crisis, the Asian economic crisis of 1997, the Russian financial crisis in 1998, the collapse of the stock exchanges in 2000, to the latest in 2008.
They are a product of globalization and geopolitical changes that have led to a new relationship of forces in international trade. Oscillations on world stock exchanges are a reflection of the struggle for dominance in the globalized market.
China’s challenge for the United States
China, which has developed into the second world economy, has become a challenge for American domination. Its economy, between market and state control, is part of the world economy, with foreign investors investing in it, among which many come from the West. So when there is a quake on the Chinese market, the whole world is feeling it.
After a decade of economic downturn, thanks to becoming a world-class factory, China is facing a slowdown, a worldwide trend. In order to maintain the competitiveness of the Chinese authorities, they chose the most obvious mechanism – devaluation of the monet, which in August, as well as in early 2016, led to chaos on the world stock exchanges.
The yuan devaluation continued following the International Monetary Fund’s listing of Chinese currency among the international reserve currencies, saying it had met all the criteria to join the US dollar, the euro, the Japanese yen and the British pound.