Guan Guoliang, the New China Life's former chairman was removed from his position last December for allegedly misusing Rmb13bn to speculate in the Beijing property market. Recently, the Chinese regulator took over 22% of the company that was owned by three other companies who helped themselves to $200 million of New China Life's pension funds.

So what! What does this have to do with a collapsing Chinese stock market? Connect the dots. What is driving the stock market is speculation by Chinese companies using their cash flow as evidenced by Mr. Guan and his cronies. What has been driving world commodity markets has been the demand by those same companies. If these companies lose money in a crash, they will no longer have the cash to buy commodities or invest. This will most likely result in a drop in the demand for those commodities, which will reverberate with hedge funds and credit derivatives that are long in these markets. Add some counter party risk, and voila! At least the price of gas will go down.

William Gamble
Author of the new book, Freedom: America's competitive advantage in the global market place
EMERGING MARKET STRATEGIES
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