Chinese stocks catch a fever

The Shanghai Composite index has fallen by a fifth since its latest peak in January, thus slipping into official bear-market territory. Investors are nervous: while so far there is little evidence that the trade war between China and the US is hurting either economy, both sides are refusing to back down, says Justin Lahart in The Wall Street Journal. China may soon face restrictions on investments into the US, and the next round of tariffs on goods will affect more producers.

A bigger problem for China, however for now, at least is its own business cycle. Export growth has softened because the "synchronised global recovery seems to have encountered some headwinds", as Chen Long of Gavekal Research points out. European and Japanese economic momentum has faded. The government has been slowly clamping down on domestic credit growth in recent months; it is now at its lowest level since 2006. The government's aim is to temper the lending slowdown rather than reverse it; it remains worried about the towering overall debt pile.

A slowdown will revive concern about the structural issues China has put off, says Capital Economics excess capacity in industry and housing, for instance. This inauspicious backdrop explains why the yuan is on the slide, says Ambrose Evans-Pritchard in The Daily Telegraph. With some foreign investors selling out, China has caught a dose of "emerging-market fever".