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RENEE MONTAGNE, host:

Now for a view from Asia, we're joined by Tom Easton. He's Asia Business Editor for The Economist magazine in Hong Kong. And thank you for joining us.

Mr. TOM EASTON (Asia Business Editor, The Economist, Hong Kong): Thank you for inviting me on.

MONTAGNE: How are stock investors reacting today?

Mr. EASTON: Well, interestingly, the market bounced back today. It's up about four percent. And if you are a critic I don't know if you would be more critical or more worried about the decline yesterday of nine to ten percent, or the increase today of four percent. Both of them have really no evident reason for why they would occur.

So the question is what is driving the market? Typically what you would imagine would drive a stock market boom is what is going on with companies. After all, people think if they make a lot of money, shares tend to go up, and if they are losing money, shares tend to go down. But in this case, every single reason that has been cited for the market movement has had to do with the government action. None have had anything to do with any of the companies in the Chinese market.

MONTAGNE: Well, that is one of the reasons that China's stock market is different from Western stock markets, or other Asian stock markets, and that's the level of involvement of the government, right? What did it do?

Mr. EASTON: Which is huge. I mean and it takes place on a number of different levels. For most of the largest companies in China, the largest shareholder is the government. All of the market has to know is that the government is going to sell a lot of the shares that it owns in these companies and they can really anticipate with great accuracy that there'll be flooded with new shares to buy and prices very considerably go down.

The second way that the government control things - it threw all the actions that it takes around the market. For instance, the rumor yesterday that was considered to quite jarring to people, was that the government would impose a capital gains tax. Today the government, let it be known, possibly because of the steep sell-off yesterday, that it would not impose a capital gains tax.

There was great concern that the head regulator for the government was going to be fine. There's been no sign that he would resign today. There was indications or rumors that the government was going to encourage or force insurance companies, which again, they are the largest shareholders in, to sell their shares in the stock market.

Again today, there doesn't seem to be any indication that they're doing it. You know, you can go through every idea about why the market was falling and it all goes back to some action of the government. And in fact, if that is true and that's clearly what people believe, then you really have to wonder what sort of market is it? Or is it a market in any sense that we understand in terms of trying to balance off, you know, the profitability of a company or supplies and - supply and demand.

I guess at the end of the day what people are saying is the profitability of companies and the ability to distribute stocks and their ability to remit the things that stocks brings like, for instance, dividends to shareholders, all stems from government action.

MONTAGNE: Now why then did what happened in China have such a big impact on the U.S.?

Mr. EASTON: Well, in the entire Chinese market, the amount of shares that foreigners are allowed to buy is slightly under $10 billion worth. They are a tiny part of the market. And that $10 billion is a tiny part of the world capital market. So in terms of money and economic value, the global exposure to the Chinese stock market is close to non-existent.

I think what people are worried about is - does a market suggest what's going on in the broader economy? Did the sell-off in China mean something was going on in China that would in somehow imperil global growth? Now China has been incredibly important for the world's growth. I mean, its economy is expanding in extraordinary rates, something - I don't know, in excess of 12 percent a year. And if China stopped expanding at the rate that it was expanding, it could have serious repercussions throughout the world.

MONTAGNE: Is this the first time U.S. markets and Europe's markets have been rattled by China's financial markets?

Mr. EASTON: The market had a sell-off about a month ago, and that rattled people here. But it didn't seem to have the same impact on the Western markets. What happened in the Chinese market happened at the same time as Alan Greenspan made some disconcerting comments about the American market. It happened when you have all the losses in the mortgage markets. And I think it was - it came at a time when people were concerned about other things. And symbolically, China means a lot.

MONTAGNE: Tom Easton is Asia business editor for The Economist magazine based in Hong Kong. Thanks for joining us.

Mr. EASTON: Thank you very much.

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