KEY POINTS:
It's worth remembering this: the 9 per cent plunge in the Shanghai Composite Index on Tuesday takes Chinese stocks back to where they were a couple of weeks ago before the Chinese New Year.
Which means the $200 billion that was wiped off the value of Chinese shares didn't even exist at the start of February.
So after Tuesday's fall, what's actually changed?
The answer is not a lot.
Some value in Chinese shares that didn't exist a couple of weeks ago doesn't exist again. But after a 130 per cent rise last year, Chinese stocks were overvalued and due for a correction anyway.
As far as economic fundamentals go, nothing has changed.
China is still the cheapest place on the globe to manufacture goods, so there's no reason to suppose the sharemarket plunge will cool its spectacular growth.
Unlike resource-rich Australia, New Zealand isn't highly leveraged to the economy, so after a shaky start yesterday morning, Kiwi stocks shrugged off the China plunge.
And even the Australian ASX-200 index fell only 2.7 per cent, compared with New Zealand's 1.5 per cent drop.
This is because despite China's phenomenal growth and potential, what matters is what's happening in the US, which is driving much of the demand for Chinese goods.
Overnight on Tuesday, US Federal Reserve chairman Alan Greenspan warned that a recession in the US was possible this year. And in a worrying sign for the strength of the US economy, durable goods orders were surprisingly soft.
That is of far more concern to New Zealand than what happens in the overheated Chinese sharemarket.
