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Our premise has long been that China’s continually deteriorating growth would yield increasingly volatile financial market dislocations, and ultimately a "correction” via a long-term reduction in asset prices – real estate, equity values, and ultimately the RMB. Last summer's A-share episode was part of that process, and a prolonged adjustment may now be upon us.
Expect strong reactions, even overreactions, in global stock markets. The regional and global equity contagion is primarily about the world waking up to the China reality: growth is much lower than official statistics indicate, and the authorities’ ability to manage growth is far more limited than previously thought. Most senior MNC executives in China knew this already.