The consequences go beyond stock markets as emerging-market currencies tumble and commodities sink.

China’s stock market has fallen sharply over recent weeks despite measures by officials in Beijing to calm investors and drum up global confidence in the country’s slowing economy. After losing 8.5 per cent on what the State media christened China’s “Black Monday”, the Shanghai Composite, the country’s main stock exchange, fell 7.6 per cent on Tuesday, August 25.

In effect, after decades of rapid growth, China is slowing down, and investors are globally worried that firms and countries which rely on high demand from China - the world's second largest economy and the second largest importer of both goods and commercial services - will be affected.

Immediate shocks

The bubbling Shanghai Composite index has consequently led to the plunging of Stock markets around the world. The carnage began with an 8.5 per cent drop in China's benchmark Shanghai Composite index followed by markets in Japan, South Korea, and Australia. That sparked selloffs in European markets and then the United States. The Standard and Poor's index of 500 large US stocks fell by nearly 4 percent on Monday, August 24.

The Paris Stock Exchange for instance fell by 5.35 per cent.The US stock market on its part is down about 10 per cent from its highs earlier this summer. That's a significant drop, but it looks less significant when one considers the larger picture. That's because the US stock market has enjoyed a huge boom over the past six years. Even after Monday's fall, the Standard and Poor's 500 index is 170 percent above the low point of the 2009 stock market crash, and 20 percent above the previous stock market peak in 2007.

The immediate consequence of the shaky Chinese stock market is but evident. The stock market it should be recalled plays an important role in the growth of developed economies. It is a market in which shares of publicly held companies are issued and traded either through exchanges or over-the-counter markets. Also known as the equity market, the stock market is one of the most vital components of a free-market economy, as it provides companies with access to capital in exchange for giving investors a slice of ownership in the company. The stock market makes it possible to grow small initial sums of money into large ones, and to become wealthy without taking the risk of starting a business or making the sacrifices that often accompany a high-paying career.

Africa’s Share of the Burden

As indicated by Prof. Desire Avom of the Faculty of Economic Sciences and Management of the University of Yaounde II Soa, Africa has its own share of the burden especially as the instability is already affecting the commodity market, notable copper. Oil producing nations will surely be seriously touched considering that the situation is causing disequilibrium between supply and demand. That in effect, is where the shoe pinches for a country like Cameroon.

African countries, such as South Africa and many English Speaking nations with financial market will be the most hit. A continuous recession of the Chinese economy will entail a fall in the demand for raw material, which constitute an important economic factor.  This situation could however be short lived depending on the capacity of the Chinese government to reverse the situation, says Avom.