China stock crash sends shockwaves through economy

Thomson Reuters
A pedestrian walks past an electronic board showing the Hang Seng Index in Hong Kong on July 8, 2015. Hong Kong equities plunged almost six percent July 8, to a seven-month low as a rout in China spread into regional markets with traders also buffeted by fears for Greece's future in the eurozone.

WASHINGTON — The Obama administration is worried that China's stock market crash could hurt the country's economy and get in the way of Beijing's economic reform agenda.

"The concern, that is a real one, is what does it mean about long-term growth in China," Treasury Secretary Jack Lew said on Wednesday.

Earlier in the day, China's tumbling stock market showed signs of seizing up and the country's securities regulator warned of "panic sentiment" gripping investors.

Speaking at an event on financial stability, Lew said the turbulence in Chinese financial markets was unlikely to infect Wall Street because "China's markets are still pretty much separated from world markets."

But he said the sell-off would be a test for Chinese economic management.

"How do Chinese policymakers respond to this, and what does it mean in terms of core conditions of the economy?" Lew said.

China is a top trading partner for the United States and a growing destination for its exports.

Washington has been pressing China for years to open its economy, including its financial sector, to more U.S. investment. It also wants China to move more quickly toward a consumer-driven economy rather than depending so much on investment and exports.

Lew said the stock crash could get in the way of that. "I hope this is not something that slows down the pace of reform," he said.

(By Jason Lange and Douwe Miedema; Editing by Peter Galloway)