08/01/2016 World Business Report

Chinese shares are on the up after Beijing ditches its

But has its credibility been damaged beyond repair?

Meanwhile, that market turmoil in China has sparked a global sell-off.

$2.5 trillion wiped off the world's stock markets.

Wall Street slumps in its worst start to a year

So much going on! I have nine minutes to tell you what is

happening around the world. And it is not a happy New Year in China!

The market turmoil in China and fears over the state

of its economy is really being felt around the world, sparking

Last week, Beijing close the stock market after 29 minutes of trading

because it fell 7%, triggering that so-called circuit breaker mechanism.

Beijing has now suspended that mechanism, allowing stocks to trade

freely. For now, it seems to be paying off. But those fears are

being felt around the world. Already, Wall Street is looking

at its worst start to Let's give you an idea

of the scale of this. If we take

the Dow Jones industrial average, the index of 30 top US companies,

it slumped again on Thursday. So far this week,

it has lost 911 points, It's a similar story

for the other US indices, making it the worst start to a year for US

shares since records began in 1928! Overall, $2.5 trillion - trillion

with a T - has been wiped off global We are only talking about a handful

of days! That's the reaction

on global financial markets. But how bad is the situation

on the ground in China? Is the economic slowdown beginning

to bite for ordinary people? Our team there has been talking to

workers at a small business in They say things are definitely

feeling worse by the day. TRANSLATION: My shoes are exported

to the UK. They are also exported to Canada. This year, the industry is

not good. It is hard to do. The industry just is not good.

TRANSLATION: Generally, I'm not making as much as before. I used to

be able to make several thousand R every month. Wheeze to get a stable

payment every month but now my pay is really unpredictable. -- we use

to get. I might make money this month but not next month.

TRANSLATION: Business is not as good as before, because as -- because the

economy is getting weaker. I'm not worried. It does not do any good to

worry. Even if I'm worried, if it is going to happen anyway. We just have

to face it calmly. Investors are very concerned that

there is more trouble to come in China. What is in stark relief is

that the problems in China are beginning to surface. The

administration's ability to suppress all of that is getting more

difficult. It is becoming much more obvious, globally and domestically

within China, that the economy is weak than they do admit to, that

there is probably a banking crisis around the corner. I have been

saying for some time but I think the Chinese economy will have a tough

landing. Much of what we are panicking about now is what we have

been talking about as an investment institution for some time.

Klaus Baader is chief Asia economist at Societe Generale. He joins us

I was hoping you could hear those comments. Eases China's coming in

for a hard landing. When China was growing, it formed a bubble of debt.

Do you agree? I certainly think that there are

significant challenges for the Chinese economy but I do not agree

that a hard landing is guaranteed. It is, however, a situation that we

have to take seriously. There is a slowing trend, suddenly. And China

has to make this difficult transition from being an investment

led economy to being a more consumption driven economy and that

is a difficult process. At the same time, Chinese labour costs have

risen sharply, the comment we earlier had from that shoe company,

they are peeling big competition from the likes of Vietnam and so

on. -- they are feeling the competition. What is going on in

China? Some may suggest that it appears the regulators in Beijing

don't know what they are doing. They have this mechanism in place and

then they abandon it. Do they know what they are doing? Well, there is

a whole lot of experimenting and I think that there is an enormous

amount of uncertainty. That is what is most damaging in this situation.

We have uncertainty in a number of areas. First, uncertainty about the

exchange rate. We have had talk of stability but then the currency

started to depreciate. They say they are targeting a trade weighted

index. The constant shifting of market regulations is poison for

markets, so we are seeing a lot of speculation against the currency,

not just from international investors, but also significant

outlet -- outflows of domestic money. There is a lot of back and

forth and I think that makes it extremely difficult for economic

agents in general to figure out the strategy of the Chinese government.

Thank you. I do apologise for the audio. Now, talking about the

ramifications for the Asian markets. This is something we have to keep

our eye on. January tends to set the tone for the rest of the year. We

cannot have this going on for the entire 2016! That is it. If you

believe some analysts, that is what they say, and in China there is also

a lot of superstition about how this might influence trade for the rest

of the year. But many others hope that is not the case because we are

seeing the Shanghai Composite higher. It opened higher this

morning, which was a huge relief, of course, after seeing how the trading

day ended on Thursday not just for Asia but for the rest of the world.

We had the US and Europe seeing huge losses. And said this morning, we

were watching with bated breath, including here in Singapore, because

there was so much anxiety over how these Chinese markets and open. The

Australian and Japanese share markets were the first to open and

they were lower this morning, basically reacting to that news late

on Thursday that the Chinese markets would be operating without the

safety net. These are the circuit breaker mechanisms we keep hearing

so much about. But once those markets did open with strong gains,

many of the Asian markets followed suit, only to give into nervousness

once again about ten minutes or so after. In the last few minutes, the

Shanghai Composite has been higher. The Japanese and Australian markets,

they have kept flat amid continuing concern over what may happen by the

end of the day. Thank you. In other news,

Saudi Arabia is considering whether to sell shares in

its vast state oil company, Aramco. That's according to

the kingdom's deputy crown prince, Mohammed bin Salman, in an interview

with the Economist magazine. Saudi's public finances have been

hit hard by the 70% plunge in the price of crude oil over

the last 18 months. Analysts estimate Aramco is

worth over $1 trillion. Even selling off a minority stake

of 20% could fund Don't forget, you can get in touch

with me and some of the team on Twitter. I'm @BBCAaron. Tweet me and

I'll tweet you back.