China’s Market Plunge: Correction or Crisis?

China’s dramatic stock market plunge this past June, in which it lost 30 percent of its value in nearly one month’s time after climbing to a seven-year high a few months prior, elicited a forceful government intervention, including an interest-rate cut, a cap on short selling, and trading suspensions. Despite this unprecedented response, Stephen Roach, senior fellow at Yale University’s Jackson Institute for Global Affairs and former chairman of Morgan Stanley Asia, says that “only time will tell if these actions are successful—or if they only buy time before the final stages of this correction run their course.” Roach says that while the steep decline in equities will likely have a limited impact on the overall economy and the chances of a hard landing remain low, continuing stock volatility could set back critical capital market reforms.