There is no way to stop China’s free fall
Investors everywhere are looking for some reason — any reason — to forecast a reversal in China's markets.
The world's second largest economy has led the globe in a no-holds-barred sell-off over the past few days.
The Shanghai Composite, already weak from a punishing June and July, has erased all its gains for the year. This reflects a malaise in the wider, real economy. Chinese industrial data is flashing signs of danger the world hasn't seen since 2009.
That means China has a lot to worry about at once.
It has to figure out how to stop its markets from crashing,
and ensure that heavily indebted danger-areas (like the property and construction sectors) remain liquid,
and keep the yuan at a level low enough to help exports (but not so low that capital starts pouring out of the country).
If China does use enough of its reserves to calm the market, it still has the gargantuan task of restructuring its corporate sector and defending the yuan. Using a mountain of cash as a band-aid isn't an option anymore.
What that means is that some of the weaker players in China's markets are likely doomed. The government will have to choose what it can and cannot save.