The red dragon, maimed.

After years of exponential growth, the red dragon lies flinching on the floor. It’s not dead, but it’s certainly maimed. And the world stands watching, waiting to see what might happen next.

The crash in China is certainly real. Since late June, the benchmark Shanghai Composite Index has fallen 30 per cent. The smaller technology-focused Shenzhen market is down almost 40 per cent. Granted, this is off the back of a spectacular bull run since the start of the year.

But that’s a serious tumble in anyone’s language.

And many in China — particularly the young — have trusted their hard-earned renminbi to these tightly-controlled markets. It’s safer than under the mattress and far sexier than the bank, and for the last few years it’s been a winning bet.

But that’s now unravelling very fast. Some twenty-somethings I’ve met in Chengdu have lost half their savings in a matter of weeks.

Yet life in China goes on. The railways are full of holidaymakers as summer gets into full swing. The shops are full of bargain-hunters happily swiping their UnionPay cards. And the bars and tea houses are packed with young professionals — only the conversation topic has turned economic.

To analysts, it all comes as no surprise. Growth is at its lowest in six years, and as much of the Western world struggles to climb out of its recessionary hole, many of China’s export markets are dryer than usual.

This is, of course, a generation of Chinese that’s only ever known an expanding China. The struggles of their parents and grandparents — the failed Great Leap Forward, the gruesome Cultural Revolution, and many others — are alien to them. The thought that the dragon might be vulnerable has never entered their minds.

So these young investors are largely upbeat. Many firmly believe intervention will solve the problem — one young man says there’s not much he can do, so it’s not worth his worrying. And in recent days the regime has placed restrictions on who can trade stocks, alongside many companies halting trading. It’s worked at least temporarily — Thursday saw a slight lift for both mainland markets and Hong Kong.

There’s no doubt red dragon will bounce back. Construction and development continues at a breakneck speed, the manufacturing industries are continuing to expand capacity, and the investors of China will get the chance to make back their fortune.

But the kind of rampant growth that’s been orchestrated in China can’t be sustainable, and if the dragon ends up slayed, the world gets dragged down with it.

This could well be a warning signal worth listening to.

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