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DAVID GREENE, HOST:

Well, it happened again this morning in China. The markets opened, stocks plummeted, and a so-called circuit breaker put an end to trading for the day after only 29 minutes. To help us make sense of what's happening in China, we spoke with Fraser Howie. He is an analyst and co-author of the book "Red Capitalism: The Fragile Financial Foundation Of China's Extraordinary Rise." We've reached him in Singapore.

UNIDENTIFIED MAN: The thing is - the thing is...

GREENE: And we're having a little trouble reaching - playing Fraser Howie.

UNIDENTIFIED WOMAN: Denmark...

GREENE: Fraser, good morning.

FRASER HOWIE: Good morning to you.

GREENE: I think about the title of your book. Things seem as fragile as ever right now with these (laughter) - with stocks plummeting. What is - what's happening?

HOWIE: That's a good question. It's a new year, but an old problem. I'm sure last year, you would have covered the booms and busts of the stock market over the summer.

GREENE: Yeah.

HOWIE: The circuit breakers that were only introduced this Monday were brought in as a direct consequence of the volatility of last summer. And the regulator basically wanted a mechanism that would, you know, stop these violent moves, and they've got one. Whether the circuit breaker's helping or hindering, the bottom line problem is there was a huge stock market bubble last year. It burst. They tried to re-inflate it. The government put restrictions on investor selling. They basically poured in about $200 billion to buy up stocks. Those problems are still with us. You had poor economic data out of China. You had - today, you had the central bank of China devaluing the currency again and basically sending a very worrying sign to the market. And the feeling is that the policymakers have lost the plot, as it were.

GREENE: So, Fraser, just listening to you describe this here, I mean, it sounds like what you're suggesting is, you know, that the Chinese economy has sort of been weakening - maybe you might see falls in stocks - but that the government's response actually is making things worse.

HOWIE: I think that's basically true. We've known for a number of years that the economy is weak. We've seen that affect things globally. We've seen the commodity sectors - Brazil, Australia - all being affected by the commodity slowdown. That's largely driven by weakness in the Chinese economy.

It's not helped, as well, that the same Chinese policymakers who for the past 20 years were said to be able to, you know, manage the economy well, set long-term policies, could manage slowdown, et cetera - their response has been wanting. And it's basically today the People's Bank of China, which is the central bank of China - they devalued their currency by only 50 basis points - half of 1 percent - but that was a big move for China. And that sent an already weak market basically tumbling today, so very mixed messages coming out from all the policymakers from China. And it's this loss of confidence in the government and how they're responding to economic weakness which I think is the real worrying story at the moment.

GREENE: Fraser, you mentioned this is not that new. I mean, this past summer, the markets in China dropped. A lot of the world seemed to sort of keep cool heads, but now you're seeing European and U.S. markets really follow China's lead here. Why is that happening?

HOWIE: Well, obviously, it's a globalized world, an interconnected world, so there are knock-on effects globally. I don't think they should be overplayed. I don't think China's collapsing. I don't think there's a financial crisis coming in China anytime soon. The government does have policy tools still to manage this, to work their way through, but it's very much a muddling through. What I think the world is slowly waking up to is that China is very much no longer the miracle economy. The growth in China is very anemic. And anyone who was pinning their global recovery hopes on a China turnaround - they're basically fooling themselves. That's not coming. China is now an economic problem for our world, not a solution.

GREENE: All right. We've been speaking to Fraser Howie. He is the co-author of a book called "Red Capitalism" and also an economic analyst. He spoke to us from Singapore. Fraser, thanks so much.

HOWIE: Thank you very much. Transcript provided by NPR, Copyright NPR.

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