An old friend of mine from my Bear Stearns days sent me this email:
"...the china story is waaay overblown - most people don't know the difference between A shares and H shares - A shares are what went down 10% last night - they are only able to be owned by local Chinese - the H shares are the ones which trade on the Hang Seng (in Hong Kong) and are able to be purchased by foreigners - anyway the A shares trade at about a 71% premium to the H shares - which means that todays selling is waaaaay overdone."
That said, China appears to be taking over-regulatory steps to crack-down on a so-called speculative bubble stock market of the past 18 months, including capgains taxes on land, higher bank reserve requirements, and higher central bank interest rates. This is anti-growth IMF/G-7/US Treasury stuff. Their real GDP is about 10%, with only 2% CPI.