SHENZHEN, China -- Speaking Wednesday morning, the president of the influential Federal Reserve Bank of New York, Bill Dudley, said Chinese monetary authorities are "very capable" and said they have plenty of policy tools at their disposal to address the ongoing financial turmoil there.
"I think I'm reasonably confident in their ability to do so," Dudley said.
Their economy is slowing. Stock prices have plummeted. Global markets gyrate daily amid doomsday predictions for their country, so surely Chinese people are on the brink of panic, right?
Not so. Here in this Chinese city of 15 million people just north of Hong Kong, life goes on pretty much as normal. Outside a branch of China Merchants Bank on Wednesday, the streets were humming, but inside the tellers were having a quiet day.
Jin Jing, a 24-year-old bank manager at the branch and an investor, said the stock market declines have hammered her with paper losses of about 8,000 yuan -- or about $1,270. But she treats it as a learning experience.
"There is not much they can do. When the crisis first began people were probably
too obedient to the government direction, including me," said Jin, a native of Shenzhen. "That's why we all stayed in so long, then we've lost even more money."
The past week's roiling of global markets has again provided a reminder that, in opaque China, small reverberations can cause huge waves. But according to numerous experts, it has also exposed some myths about the world's largest country that should be more obvious.
One of these myths is that China's stock market is a weather vane for the larger economy. It most clearly is not.
Patrick Chovanec, chief strategist at Silvercrest Asset Management, is one analyst who has long warned that China's stock market is an exercise in rampant speculation, and an irrelevant indicator of how the nation is faring.
"There plenty of reasons to worry about retraction in the Chinese economy but China's stock market is not one of those," said Chovanec, an adjunct professor of international affairs at Columbia University. The country's bigger problems, he said Wednesday, involve managing debt and transitioning toward an economy that grows domestic consumption, instead of cheap imports.
China claims its GDP is still expected to grow 7 percent this year -- an impressive number, even if hard to verify. Whatever the real growth rate, the country's manufacturing output appears to be falling faster than expected. That's causing major anxiety worldwide, especially for countries that export raw materials and semi-finished goods to China's factories.
Last Friday, a negative report on China's manufacturing output, combined with panic selling in China's stock markets, helped the Dow Jones industrial average to plunge 551 points, or 3 percent. The Dow plunged deeply again on Monday, then wobbled Tuesday. Over the last five sessions, it has dropped 10.5 percent, its biggest five-day fall since August of 2011.
Bill Bishop, a longtime China watcher who produces the Sinocism newsletter, said many U.S. stocks were due for a correction, with investors waiting for reasons to unload. They found them in China's reported woes and the possibility of an upcoming rate hike by the Federal Reserve.
"The size of sell off was ridiculous," Bishop said in a telephone interview on Tuesday night. "The idea that China is about to collapse is completely overblown."
Yet Beijing may have brought some of its problems on itself, said Bishop, for at least two reasons. One of these is lack of transparency about economic decisions by Chinese leaders, which causes investors to be more risk-averse in the face of uncertainly. "They are far too opaque and we know far too little about how they operate," he said.
A more recent problem, he said, is Chinese President Xi Jinping's priority of "ideological retrenchment," including requiring top party leaders to re-read books from the founding day of the People's Republic of China. "If you have people re-reading Marx, it is not going to lead to good decisions on running your economy," said Bishop.
On the streets of Shenzhen, it would be hard to notice a crisis of confidence. One of the world's highest skyscrapers -- the Ping An Financial Center -- is rising from the central city. High-tech companies such as Tencent, Huawei and ZTE are headquartered in Shenzhen, often referred to as China's Silicon Valley, at least in terms of hardware. Smaller entrepreneurial outfits are starting.
Yet even here, home to one of China's two big stock exchanges, residents are wondering how China's leaders will manage both the equity markets and the international fallout of the last week. While the wealthy elite make up the bulk of Chinese investors, some in the middle class jumped into the market during the run-up this spring, and have since been badly burned.