:00:00. > :00:18.Chinese shares are on the up after Beijing ditches its
:00:19. > :00:28.But has its credibility been damaged beyond repair?
:00:29. > :00:33.Meanwhile, that market turmoil in China has sparked a global sell-off.
:00:34. > :00:36.$2.5 trillion wiped off the world's stock markets.
:00:37. > :00:39.Wall Street slumps in its worst start to a year
:00:40. > :01:11.So much going on! I have nine minutes to tell you what is
:01:12. > :01:18.happening around the world. And it is not a happy New Year in China!
:01:19. > :01:20.The market turmoil in China and fears over the state
:01:21. > :01:23.of its economy is really being felt around the world, sparking
:01:24. > :01:36.Last week, Beijing close the stock market after 29 minutes of trading
:01:37. > :01:43.because it fell 7%, triggering that so-called circuit breaker mechanism.
:01:44. > :01:48.Beijing has now suspended that mechanism, allowing stocks to trade
:01:49. > :01:55.freely. For now, it seems to be paying off. But those fears are
:01:56. > :01:58.being felt around the world. Already, Wall Street is looking
:01:59. > :02:01.at its worst start to Let's give you an idea
:02:02. > :02:05.of the scale of this. If we take
:02:06. > :02:08.the Dow Jones industrial average, the index of 30 top US companies,
:02:09. > :02:15.it slumped again on Thursday. So far this week,
:02:16. > :02:19.it has lost 911 points, It's a similar story
:02:20. > :02:31.for the other US indices, making it the worst start to a year for US
:02:32. > :02:37.shares since records began in 1928! Overall, $2.5 trillion - trillion
:02:38. > :02:42.with a T - has been wiped off global We are only talking about a handful
:02:43. > :02:57.of days! That's the reaction
:02:58. > :02:58.on global financial markets. But how bad is the situation
:02:59. > :03:01.on the ground in China? Is the economic slowdown beginning
:03:02. > :03:04.to bite for ordinary people? Our team there has been talking to
:03:05. > :03:10.workers at a small business in They say things are definitely
:03:11. > :03:24.feeling worse by the day. TRANSLATION: My shoes are exported
:03:25. > :03:28.to the UK. They are also exported to Canada. This year, the industry is
:03:29. > :03:33.not good. It is hard to do. The industry just is not good.
:03:34. > :03:39.TRANSLATION: Generally, I'm not making as much as before. I used to
:03:40. > :03:43.be able to make several thousand R every month. Wheeze to get a stable
:03:44. > :03:48.payment every month but now my pay is really unpredictable. -- we use
:03:49. > :03:52.to get. I might make money this month but not next month.
:03:53. > :04:02.TRANSLATION: Business is not as good as before, because as -- because the
:04:03. > :04:06.economy is getting weaker. I'm not worried. It does not do any good to
:04:07. > :04:09.worry. Even if I'm worried, if it is going to happen anyway. We just have
:04:10. > :04:22.to face it calmly. Investors are very concerned that
:04:23. > :04:29.there is more trouble to come in China. What is in stark relief is
:04:30. > :04:33.that the problems in China are beginning to surface. The
:04:34. > :04:39.administration's ability to suppress all of that is getting more
:04:40. > :04:43.difficult. It is becoming much more obvious, globally and domestically
:04:44. > :04:47.within China, that the economy is weak than they do admit to, that
:04:48. > :04:51.there is probably a banking crisis around the corner. I have been
:04:52. > :04:55.saying for some time but I think the Chinese economy will have a tough
:04:56. > :04:58.landing. Much of what we are panicking about now is what we have
:04:59. > :05:03.been talking about as an investment institution for some time.
:05:04. > :05:06.Klaus Baader is chief Asia economist at Societe Generale. He joins us
:05:07. > :05:18.I was hoping you could hear those comments. Eases China's coming in
:05:19. > :05:23.for a hard landing. When China was growing, it formed a bubble of debt.
:05:24. > :05:29.Do you agree? I certainly think that there are
:05:30. > :05:37.significant challenges for the Chinese economy but I do not agree
:05:38. > :05:42.that a hard landing is guaranteed. It is, however, a situation that we
:05:43. > :05:51.have to take seriously. There is a slowing trend, suddenly. And China
:05:52. > :05:55.has to make this difficult transition from being an investment
:05:56. > :06:02.led economy to being a more consumption driven economy and that
:06:03. > :06:06.is a difficult process. At the same time, Chinese labour costs have
:06:07. > :06:10.risen sharply, the comment we earlier had from that shoe company,
:06:11. > :06:15.they are peeling big competition from the likes of Vietnam and so
:06:16. > :06:24.on. -- they are feeling the competition. What is going on in
:06:25. > :06:29.China? Some may suggest that it appears the regulators in Beijing
:06:30. > :06:33.don't know what they are doing. They have this mechanism in place and
:06:34. > :06:39.then they abandon it. Do they know what they are doing? Well, there is
:06:40. > :06:44.a whole lot of experimenting and I think that there is an enormous
:06:45. > :06:51.amount of uncertainty. That is what is most damaging in this situation.
:06:52. > :06:58.We have uncertainty in a number of areas. First, uncertainty about the
:06:59. > :07:05.exchange rate. We have had talk of stability but then the currency
:07:06. > :07:11.started to depreciate. They say they are targeting a trade weighted
:07:12. > :07:21.index. The constant shifting of market regulations is poison for
:07:22. > :07:26.markets, so we are seeing a lot of speculation against the currency,
:07:27. > :07:31.not just from international investors, but also significant
:07:32. > :07:41.outlet -- outflows of domestic money. There is a lot of back and
:07:42. > :07:45.forth and I think that makes it extremely difficult for economic
:07:46. > :07:54.agents in general to figure out the strategy of the Chinese government.
:07:55. > :08:03.Thank you. I do apologise for the audio. Now, talking about the
:08:04. > :08:12.ramifications for the Asian markets. This is something we have to keep
:08:13. > :08:15.our eye on. January tends to set the tone for the rest of the year. We
:08:16. > :08:20.cannot have this going on for the entire 2016! That is it. If you
:08:21. > :08:25.believe some analysts, that is what they say, and in China there is also
:08:26. > :08:29.a lot of superstition about how this might influence trade for the rest
:08:30. > :08:35.of the year. But many others hope that is not the case because we are
:08:36. > :08:40.seeing the Shanghai Composite higher. It opened higher this
:08:41. > :08:45.morning, which was a huge relief, of course, after seeing how the trading
:08:46. > :08:50.day ended on Thursday not just for Asia but for the rest of the world.
:08:51. > :08:55.We had the US and Europe seeing huge losses. And said this morning, we
:08:56. > :09:01.were watching with bated breath, including here in Singapore, because
:09:02. > :09:06.there was so much anxiety over how these Chinese markets and open. The
:09:07. > :09:09.Australian and Japanese share markets were the first to open and
:09:10. > :09:13.they were lower this morning, basically reacting to that news late
:09:14. > :09:16.on Thursday that the Chinese markets would be operating without the
:09:17. > :09:21.safety net. These are the circuit breaker mechanisms we keep hearing
:09:22. > :09:28.so much about. But once those markets did open with strong gains,
:09:29. > :09:33.many of the Asian markets followed suit, only to give into nervousness
:09:34. > :09:41.once again about ten minutes or so after. In the last few minutes, the
:09:42. > :09:47.Shanghai Composite has been higher. The Japanese and Australian markets,
:09:48. > :09:48.they have kept flat amid continuing concern over what may happen by the
:09:49. > :09:55.end of the day. Thank you. In other news,
:09:56. > :09:56.Saudi Arabia is considering whether to sell shares in
:09:57. > :09:59.its vast state oil company, Aramco. That's according to
:10:00. > :10:01.the kingdom's deputy crown prince, Mohammed bin Salman, in an interview
:10:02. > :10:04.with the Economist magazine. Saudi's public finances have been
:10:05. > :10:06.hit hard by the 70% plunge in the price of crude oil over
:10:07. > :10:09.the last 18 months. Analysts estimate Aramco is
:10:10. > :10:11.worth over $1 trillion. Even selling off a minority stake
:10:12. > :10:14.of 20% could fund Don't forget, you can get in touch
:10:15. > :10:44.with me and some of the team on Twitter. I'm @BBCAaron. Tweet me and
:10:45. > :10:48.I'll tweet you back.