China's Shanghai Composite Index has fallen catastrophically — by 7.6 percent just on Tuesday. The decline follows a huge Monday collapse dubbed "Black Monday" and is part of a four-day slide; on the heels of another huge decline in July, this has erased the Chinese stock market's 2015 gains entirely. On Monday, stock markets around the world dropped as well following the Chinese losses.
So what does this mean for China? China's stock market is not a major part of the Chinese economy, so it's unlikely that this crash alone will trigger a broader economic crisis there. But the political consequences could be quite serious. There is a big debate going on right now within China's leadership over what to do about the economy, and this turmoil could push that debate in the wrong direction.
The crash could bolster political factions inside China that want to block critical economic reforms, and weaken factions that do want these reforms — which are, make no mistake, very important for the country's future. Without these reforms, China is much likelier to face far more severe economic problems.
