Market Turmoil Highlights China’s Impact on U.S. Economy

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• JIM LEHRER:

  Now, the China angle to the world markets story, and to Jeffrey Brown.

• JEFFREY BROWN:

  For the past year-and-a-half, James Fallows has been living in China and reporting on the vast economic and social changes there for the Atlantic magazine. His latest article, titled "The $1.4 Trillion Question," looks at China's increasing ties to U.S. financial markets.

  Jim Fallows is back home for a visit and joins us now.

  Welcome.

• JAMES FALLOWS, Reporter, The Atlantic:

  Thank you very much.

• JEFFREY BROWN:

  And it's quite a week to be here.

• JAMES FALLOWS:

  It certainly is.

• JEFFREY BROWN:

  How does what we've been seeing this week, all that volatility, look to the Chinese? What do they see?

• JAMES FALLOWS:

  Well, of course, I've been away for four days now so my impressions may be out of date, but I think it's a very interesting change of mood for the Chinese.

  You know, China has terrible economic problems, as everybody knows. It has rich and poor; it has pollution problems. But there's been a very striking economic confidence, at least during the year-and-a-half I've been there.

  The stock market has gone up and up and up. I think the Shanghai Exchange almost tripled in value during the time I was there. And so there's been a sense that everything could be managed in a positive way.

  And time and again, I heard people say, "Oh, yes, the stock market will keep going up all this year because of the Olympics or because it's a lucky year or whatever." So they have suddenly this experience with real financial markets and their ups and downs. I think there's a certain loss of innocence for the Chinese.