It’s wiped out more than $8 trillion in the value of global equities, leaving virtually no market unaffected, yet reaction from world leaders so far has ranged from muted to dismissive.
Since Aug. 11, when China set off the panic with its decision to devalue the yuan, President Barack Obama has kept quiet on Martha’s Vineyard. German German Chancellor Angela Merkel said she was sure China would make it right. French President Francois Hollande didn’t think it was a big deal.
“Market movements, we know them -- and we can’t adjust our positions just to market indexes,” Hollande said in Berlin on Monday alongside Merkel and Ukrainian President Petro Poroshenko. “The global economy is solid enough not to have its growth outlook tied only to China’s situation.”
Australian Prime Minister Tony Abbott had a message for investors: Stock market corrections aren’t unusual and “it’s important that people don’t hyperventilate about these things.”
The political restraint comes as European stocks suffered their worst day since 2008, the year Obama came to power in the throes of a financial crisis, and U.S. stocks took a hammering, while Chinese shares fell further Tuesday. As fear spreads that the slowdown in the world’s second-largest economy is worse than anticipated and China’s policy makers seem unable to stop it, Merkel simply said to have faith.
“China will do everything in its power to stabilize the economic situation,” she said, citing the International Monetary Fund as saying the turmoil in China won’t result in a sustained crisis.
Carlo Cottarelli, an executive director with the IMF representing countries such as Italy and Greece on its board, said on Aug. 22 in Rimini that it was “completely premature” to be speaking of a Chinese crisis.
“It’s not clear how much influence political leaders can have in a day of such extreme volatility,” said Mike Moran, head of economic research at Standard Charted Plc in New York. “If such extreme volatility persists then central bankers may become more vocal in trying to placate fears.”
Prime Minister Narendra Modi was taking a glass-half-full approach for now. Modi said India should turn crisis into opportunity, the Press Trust of India reported, citing remarks from Finance Minister Arun Jaitley.
In Washington, the task of reacting to the financial turbulence fell on White House spokesman Josh Earnest who offered the following reassurance.
“Well as it relates to, you know, we’ve seen a lot of volatility in China’s stock markets over the last several weeks,” he told reporters. “And China, I’m sorry, the Treasury Department has been closely monitoring global markets.”
On his first day back at work, Obama waved to journalists as he boarded a helicopter on the White House South Lawn to begin a trip to Las Vegas. President Xi Jinping will travel to Washington next month in his first state visit as president.
Republican contender Scott Walker on Monday said “Americans are struggling to cope with the fall in today’s markets driven in part by China’s slowing economy” and thinks Obama should refuse to welcome his Chinese counterpart.
There are precedents of Obama emerging from his two-week break to comment on an issue of importance. Last year, he addressed reporters about the beheading of James Foley, the riots in Ferguson and about the change in Iraqi leadership.
Japan’s finance minister Taro Aso did weigh in, criticizing China’s recent intervention in markets after the yen surged the most since 1998.
“It’s not really the kind of action I would expect from authorities of a nation that aims to have an international currency,” Aso told reporters on Tuesday.
Still, the words not said by leaders may indicate that members of the Group of Seven advanced economies aren’t coordinating together how to weather turmoil that has investors now wondering if the U.S. economy can stomach higher interest rates.
“Unless recent volatility starts to resemble systemic risks like that of 2008-09 (which it does not), then I don’t think political leaders will offer much support,” Moran said.