Despite the government’s best efforts (and new pronouncements today) China’s public markets are collapsing.

Markets in China have been wobbly for a while, and this latest decline is further evidence that the government’s policies to regain control of a runaway market are hitting a brick wall.

The seeds of this decline (and what it means for China’s economy), were spelled out incredibly well in this Barron’s interview with Anne Stevenson-Yang. And the picture is grim.

China borrowed a lot of money to finance projects (mostly vanity projects) to boost its economy as the rest of the global economy went into a tailspin in the wake of the financial crisis in the late 2000’s.

And while the rest of the world began to pull out, the pressures on China’s economy forced the lending boom to continue.

No one believes in the official Chinese growth numbers anymore (over drinks on Friday I put the number at 5 percent, but pessimists claim it’s even lower).

And China’s growth numbers are incredibly important. Without enough economic growth to keep a politically *ahem* constrained population happy, China’s elite risks losing their grip on power. That has global ramifications that have a lot of investors in the West very worried. On top of that, Chinese government spending has been one of the engines of growth for the rest of the emerging markets thanks to their infrastructure investments in nations that have a lot of natural resources that a billion-strong China population needs (except India… caveat.. I’m not a macroeconomic expert, or even a novice, so take all of this with a grain of salt).

What does all of this mean for a global economy (especially a tech economy)? Well, most U.S. investors that I’ve ever raised this subject with don’t care. They think the American economy is insulated enough (self-sufficient enough?) to weather any typhoons caused by an earthquake in the Chinese economy.

I’m not so sure, given the penchant for China to reach out these days (conflicts are simmering with India, Japan, and Taiwan) as a way to keep its potentially restive population quiet by focusing its attention elsewhere.

On top of all of this, the current leadership is in the middle of the biggest, deepest, most profound purge of party members since Mao’s notion of a permanent revolution, according to some folks I talked to. And none of that is good.

What does this mean for Chinese startups? Or for China’s biggest tech companies? Nothing great. But potentially nothing cataclysmic. Hardware makers like Huawei, Lenovo, and Xiaomi and are, or have made, inroads into global markets already. Alibaba is seemingly everywhere all the time.

Companies more focused on the domestic market may have a tough road to hoe, but it’s worth remembering that China’s stock market is only a fraction of the country’s total economy.

The problem is that the rest of the economy is more opaque than the Chinese stock market, and at this point could be like the big cities and airports that the country has built for its rural populations… totally meaningless.

Featured Image: Joseph Sohm/Shutterstock

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