$100 Billion Dip in Chinese Stock Market May Only Be "Correction"

As the "global sell-off" and decline in share prices worldwide enters its second day, investors are wondering whether it is the beginning of a substantial change, or a "correction" in prices due to accelerating growth reaching a threshold.

According to the BBC, the sell-off and drop in prices, which most sources trace to markets in China, is the result of worries about Chinese crackdowns on illegal trading, and issues regarding taxation of capital gains. The Chinese main share index has "more than doubled in the past year," and "emerging markets" funds worldwide have been turning towards China to invest. Throughout China's economy, government has been challenged to set regulation and taxation strategies during a time of fast-paced growth and foreign investment. The government has also gone through a period of rapid change in currency policy, and they are opening the Chinese economy to a much greater degree to the influence of the international markets.

The Globe and Mail, of Canada, writes that there have been "plenty of signs a market correction was in the works," but that traders were ignoring the signs to sell. The temptation to continue "red hot" gains as the Chinese stock market reforms led to additional waves of investment from overseas.

Market index dips of two to three percent have been seen in many markets around the world at this point, but as Gavin Graham, a chief investment officer in Toronto quoted by the Globe and Mail noted, this is "a stock market event, not an economic event." The Chinese government has been quite clear that they are not going to tolerate speculation in stock or currency markets, and "it's apparent they are actually going to do it" he says, which is causing rapid changes in investment strategies. To experienced, long-term traders, this "adjustment" is a time to quit holding one's breath as the market rises, and breathe a sigh of relief at a period of stabilization.