Paul Krugman: When China Stumbles

The Chinese situation looks fairly grim — and new numbers have reinforced fears of a hard landing, leading not just to a plunge in Chinese stocks but to sharp declines in stock prices worldwide. O.K., so far so bad. And some smart people think that the global implications are really scary; George Soros is comparing it to 2008. One reason America’s subprime crisis turned global in 2008 was that foreigners in general, and European banks in particular, turned out to be badly exposed to losses on U.S. securities. But China has capital controls — that is, it isn’t very open to foreign investors — so there’s very little direct spillover from plunging stocks or even domestic debt defaults.