Good morning, Quartz readers!
The past month’s dramatic nosedive of Chinese stocks made for gripping headlines. So did this week’s even more dramatic rescue by the Chinese government. But strip away the rollercoaster clichés and the big, scary numbers, and you’ll see them for what they are: a distraction from a slower, more baroque kind of tragedy.
The show-stealer, margin trading—the use of borrowed money to buy stocks, which helped caused the crash—is a case in point. There is now likely around 3 trillion yuan ($480 billion) of such money, but it’s a small fraction of a debt overhang that some estimates put at $30 trillion. As for systemic risk, China’s stock market is actually a tiny part of its financial system. In the first five months of 2015, more than three-quarters of total financing came from bank loans, compared with just over 4% from the stock market. Only about 91 million individuals have accounts, about 7% of the population (and many retail investors have multiple accounts).
China’s other debt woes, while as significant, are much less sexy. Local government debt restructuring? Yawn. Insurance sub-debt? Meh.
Sexy or not, all these things are the symptoms of a larger, more opaque, and more pernicious disease: the refusal by China’s leaders to start shifting wealth from the state to households. As they dawdle, debt metastasizes throughout the economy, strangling the flow of capital to healthier parts. The recent market chaos is a sideshow to this larger debt drama. However, it’s also its after-effect: the consequence of capital having nowhere else to go.
What makes China’s reaction to the stock-market chaos worrying is that it exemplifies the government’s approach of treating flare-up of debt disasters on a malady-by-malady basis. Urging people to gamble on stocks doesn’t create genuine, sustainable value. What it does do is suggest that Beijing doesn’t really know the difference.—Gwynn Guilford
SPONSOR CONTENT BY PIMCO
Five things on Quartz we especially liked
All the Greece you ever need. If you’ve given up on trying to followthe Greek drama by now—and frankly, who can blame you?—brush up quickly with this handy summary of our recent coverage, including acomplete history of the debt crisis, how Grexit would actually happen, why it shouldn’t, and why the bad-boy finance minister, Yanis Varoufakis, who quit this week, was right all along.
The terrifying spread of Lyme disease. The prevalence of the tick-borne illness is on the rise across the world. Gwynn Guilford looks into the reasons why, which—like so much these days—have at least something to do with climate change and the way humanity has interfered with animal habitats.
Eritrea’s refugee exodus and Europe’s bogus solution. Eritrea is the biggest source of refugees to Europe after Syria. The EU wants to give Eritrea more money to stem the tide. Alex Cocotas interviews refugees in Israel who fled the brutal regime, and uses their harrowing stories to explain why that’s exactly the wrong method.
India philanthropic opportunity. The country’s new Corporate Social Responsibility Act obliges big companies to put 2% of their profits—or some $3 billion a year—to good causes. Neha Hiranandani explains why this money could all go down the drain without a nationwide effort to figure out where it should go.
Inside the mystique of Jim Beam bourbon. Reid Mitenbuler visits the whiskey maker, and relates how its appeal is a carefully crafted mix of marketing (concocted in the “Liquid Arts Studio,” with its mock-ups of various bars and sitting rooms) and highly scientific product development.
A podcast we especially like, and think you will too
This week, Actuality, the Quartz/Marketplace podcast, scratches an itch with a trip to Key West, Florida, where the only prescription for an outbreak of dengue fever may be genetically altered mosquitoes. Plus, giant robots from the US and Japan do battle, and disappoint.
Five things elsewhere that made us smarter
Russia’s revolting cheeses. Since Moscow responded to Western sanctions by banning some food imports, local producers have been filling the gap with imitations. Shaun Walker of The Guardian taste-tested cheeses, from a faux parmesan with a “metallic, pungently sweaty kick” to a cheddar clone that is the “Dmitry Medvedev of Russian cheeses, inoffensive and vaguely pointless.”
Crime-fighting technology with a racist bias. It’s called forensic DNA phenotyping, and police agencies are trying it as a way to make sketches of crime suspects using traces of DNA. Heather Dewey-Hagborg, an artist who has experimented with the technique herself, explains in New Inquiry why it’s not only of little use in catching criminals, but brings back the ghost of racial profiling.
What if there’s a faster way to swim? Swimming underwater like a tuna—undulating your body sideways using a “fish kick”—takes advantage of complex fluid dynamics to easily outpace swimmers doing the front crawl or butterfly. Nautilus editorial intern Regan Penaluna got in the pool to try it out herself.
Behind the scenes of the Greek tragedy. A senior advisor to Greece’s government tells his side of the story of five months of bruising negotiations with creditors. Though partial, it’s revealing about the tactics employed by both Athens and its lenders. “We went into a war thinking we had the same weapons as them”, he tells Christian Salmon of Mediapart. “We underestimated their power.”
Climate scientists are tortured souls. John Richardson, for Esquire, got inside the minds of several climatologists and found them united by a kind of existential quandary—caught between realism about the terrifying future their research reveals, and the need to stay positive about possible solutions, give hope to their own children, and not give fodder to climate-change deniers.
Our best wishes for a relaxing but thought-filled weekend. Please send any news, comments, DNA phenotypes, and swimming techniques firstname.lastname@example.org. You can follow us on Twitter here for updates throughout the day.
You’re getting the Europe and Africa edition of the Quartz Daily Brief. To change your region, click here. We’d also love it if you shared this email with your friends. They can sign up for free here.