Filed under: China, China Life Insurance ADS (LFC)

Markets in China plunged overnight. Hong Kong’s Hang Seng dropped 5.5% to 23,819. The Shanghai Composite dropped 5.1% to 4,914. Some shares fell much more. China Life (NYSE: LFC) sold off 9.5% and China Petroleum (NYSE: SNP) dropped 9.1%.

Markets in China are nearing a flat-out correction. in the last month, the Hang Seng has dropped about 13% putting it down much more than the S&P 500. The Shanghai Composite is now off about 3% for the period, but that is after moving up over 80% during the previous year.

Much of the wealth of China’s middle class is built on the rising value of the stock market and real estate markets there. Any slowdown in the country’s GDP which has been rising over 10% a year will probably take the stock market down further. This could lead to a recession in consumer spending in China.

The fall in the stock market also shows how closely China’s economy is tied to the US. As chances for a recession grow here it is clear that imports from the world’s most populated country could take a big tumble.

The US is not the only country which needs to worry about negative GDP growth.

Douglas A. McIntyre is an editor at 247wallst.com.

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This entry was posted on Monday, January 21st, 2008 at 5:26 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.