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Why China’s Stock Market Sell-Off Could Trigger a Global Crash

by | Jul 28, 2021

It’s become increasingly clear this week that investors must tread carefully in the China stock market sell-off. 

Chinese tech-education stocks continue their decline this week as investors remain unnerved by the Chinese government’s growing crackdowns on its own tech companies. As a result, Hong Kong’s Hang Seng Index fell more than 8% this week — though it has risen almost 2% as I write this. 

I can’t say I’m shocked to see this happening because… I saw this coming months ago.

About a year ago, a buddy of mine — a long-term investor, not an active trader — asked me for my opinion about Alibaba

Although I thought the Chinese e-commerce company was awesome, I told him I didn’t like the fact that its own government didn’t foster growth and gets upset when companies become too influential in China.

I saw that as a major risk and warning sign for the future (lack of) growth for this multinational tech company.

From that point on, I did more research into the Chinese government going after its own tech giants. And I saw how strictly regulated things were becoming, and have been warning traders about China stocks ever since.

As I mentioned in Monday’s article, it seems everything came to a head this weekend when China announced new reforms for private education companies in an effort to decrease student workloads and dismantle a sector it believes has been “hijacked by capital.”

The government basically banned the entire industry of online education, causing the China stock market sell-off to start with a swift and panicked boom. 

Now: The China Stock Market Sell-Off. Next: A Global Crash

The stock market did not react well to China eradicating a $100 billion dollar industry from its own country.

The KraneShares CSI China Internet ETF (KWEB) fell as far as 14% this week, and Alibaba Group Holding Ltd  (NYSE: BABA) hit lows investors haven’t seen since March 2020.

To us Western capitalist-thinking people, this move seems irrational and counter-intuitive. To me, this move says the Chinese government just doesn’t care. It doesn’t have the same values as us, and doesn’t want to play the same game.

Well, I don’t want to play Beijing’s game — and neither do investors. 

Whereas people like WealthPress Senior Strategist Roger Scott and I — capitalist investors in the private sector of the market — take the viewpoint that if something makes money and is good for the economy, then it should continue full throttle. The Chinese government does not.

It has the viewpoint that you cannot have a company that is above the state. The state is the most important entity in the country, so when China sees multi-billion-dollar companies become tech giants, it becomes a problem to them.

But the Chinese government is just getting started, and this is merely the early stages of the chaos that’ll soon explode.

However, what I’m most nervous about is what’ll happen during the final phase of the China stock market sell-off… which could be the trigger to the global market crash I’ve been warning everyone about.

Check out my short video below to learn more about the China stock market sell-off and the Money Link I have set up to withstand against it.

Also be sure to share your thoughts in the comments section below. 

And as always, send any trading questions to jeff@joyofthetrade.com and stay ahead of the markets, especially these choppy ones, by subscribing to our YouTube channel.

WRITTEN BY<br>Jeff Zananiri

Jeff Zananiri

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