China's economic woes extend far beyond its stock market

As share prices continue their rollercoaster ride, China's governance problems are becoming impossible to ignore. Given the country's importance to the global economy, domestic instability could pose major risks worldwide

The Chinese government's heavy handed efforts to contain recent stock market volatility - the latest move prohibits short-selling and sales by major shareholders - have seriously damaged its credibility. But China's policy failures should come as no surprise. Policymakers there are far from the first to mismanage financial markets, currencies, and trade. Many European governments, for example, suffered humiliating losses defending currencies that were misaligned in the early 1990s.

Still, China's economy remains a source of significant uncertainty. Indeed, although the performance of China's stock market and that of its real economy has not been closely correlated, a major slowdown is under way. That is a serious concern, occupying finance ministries, central banks, trading desks, and importers and exporters worldwide.

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