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The Dow takes a nosedive amid 'Black Monday'




Traders work on the floor of the New York Stock Exchange (NYSE) on August 24, 2015 in New York City. As the global economy continues to react from events in China, markets dropped significantly around the world on Monday. The Dow Jones industrial average briefly dropped over 1000 points in morning trading.
Traders work on the floor of the New York Stock Exchange (NYSE) on August 24, 2015 in New York City. As the global economy continues to react from events in China, markets dropped significantly around the world on Monday. The Dow Jones industrial average briefly dropped over 1000 points in morning trading.
Spencer Platt/Getty Images

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When the Chinese stock market sneezes, the world catches a cold. Stocks everywhere are tumbling Monday morning amid worries that the world's second-largest economy is slowing down.

But this ain't your ordinary markets story.

The selloff has wiped the Shanghai Composite's gains for the year. Chinese papers have dubbed it "Black Monday."

The domino effect

Here at home the markets are feeling the ripple. The Dow took a nosedive Monday morning, and that has a lot of people worried about what that could do to our economy.

Clayton Dube is director of USC's US China Institute. He said China's market woes can have a domino effect on the rest of the world.

"China has been responsible for the bulk of economic growth worldwide for the last several years, so if China is slowing, it doesn't just impact American exports to China, but it also affects what China buys everywhere else in the world. And because we sell to everywhere else in the world, there is that ripple effect," he said.

He adds that the Chinese stock market has dropped nearly 40 percent in the past month.

When bubbles burst

The Chinese government has tried to stop the bleeding by issuing some strict trading policies, but Dube says the moves amount to too little too late.

"The problem really is that the Chinese stock market doesn't really reflect the actual Chinese economy," he explains. "You were spending three-times more to get the same profit."

When investors realized that they were wasting money, they began pulling their money out. This, along with some troubling economic indicators led droves of investors to follow suit, leading to -- ta-da! -- a multi-trillion-dollar disaster.

Local impact

Though gobs of money disappearing literally overnight sounds like a terrifying scenario, Dube says impact on Southern California will be minimal. He says Chinese tourists and businesses will continue to invest in California.

"They're still going to see investing in something tangible in the United States as a better long term investment than what might be available in China right now," he says. "You can expect America will remain a top tourist destination, that especially means Los Angeles."

Albeit, spending may be less robust.

"They may buy fewer things, they may stay fewer days, but the attraction will remain," he said.

To listen to the full interview, click on the blue audio player above