Why US startup are watching China’s stock market

Global Business

China Stock Market FrenzyA stock investor watches the screen at a brokerage house in Fuyang in central China’s Anhui province Tuesday, June 30, 2015. (Chinatopix Via AP)

As the convergence between Silicon Valley and China continues to grow, any wild ride in the Chinese stock market can certainly seem like a big deal to American investors.

The recent sell-off has drawn panic among U.S. investors who have come to rely on the growing Chinese market for profits.

Jack Duan, CEO of Gliding Eagle, an online trading platform selling U.S.-made food and vitamins, has been fielding questions from investors about whether China’s stock market crash will lead to fewer purchases from Chinese consumers.

The same questions were posed in front of Charlie Giang whose company manufactures baby goods.

“They are worried there might be a stoppage, a lack of capital, and a breakdown of manufacturing,” Giang said. But he feels the fears are overblown.

“They don’t understand the Chinese economy, it doesn’t work that way. On the supply side, it’s healthy, the economy is still growing,” he said.

Extensive Chinese government efforts have propped up the stock market and the equity market slowly picked up in recent days.

Mayors from Silicon Valley banded together for a special trip to China last April to ensure growing high-tech investment from China.
Regulators cracked down on “grey-market” margin lending, which became a big problem because the markets were flooded with highly leveraged stock bets. They also cut interest rates, prevented any new IPOs, and arranged $19 billion in purchases from fund managers.

The stock markets appear to be pulling back from the brink. The benchmark Shanghai Composite rose 2.5 percent during Monday’s session and it closed up last week with a 5 percent gain.