China's market Leninism turns dangerous for the world

Beijing's botched efforts to prop up the country's stock markets have collapsed. An estimated $300bn of state-orchestrated buying achieved nothing, overwhelmed by an avalanche of selling by investors forced to cover margin debt.

Professor Christopher Balding from Peking University wrote on FT Alphaville that China is lurching from one incoherent policy to another, shedding credibility and its aura of omnipotence at every stage. "There is a very real risk that Beijing is losing control of the story," he said.

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Whether or not China's economy is as weak as feared, the crisis is feeding a global chain-reaction through the entire nexus of emerging markets (EM), now half the global economy and therefore a greater threat than in the previous EM crises of the early 1980s and the late 1990s. "We are seeing the worst of all storms for emerging market currencies," said Bernd Berg from Societe Generale.

"This crisis has the potential to become worse than the Asian crisis in 1997/98 as it is spreading globally. Panic selling is triggering a bloodbath among EM currencies," he said.

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The Fed cannot cut rates this time, but it can issue a clear signal that it plans to delay rate rises. The futures markets are already pricing this in, slashing the chance of a rise in September to just 24pc, down from 50pc on Thursday.