Chinese Stocks Just Created a New Headache for Janet Yellen

28-Jul (Bloomberg) — Exit strategies used to be the preoccupation of Pentagon planners. Nowadays, it’s more a province for central bank watchers, since the Federal Reserve gorged on trillions of dollars of mortgage and government debt.

And in that economic realm, China has just added a new conundrum. The dependence of the nation’s stock market on official support was exposed Monday with the biggest drop since 2007 amid speculation aid had been dialed back. The Shanghai Composite Index fell 1.7 percent Tuesday even after China pledged to keep up efforts to “stabilize” the market.

China’s actions in the past month add a new asset to those whose prices depend on policy-maker fiat — from European and Japanese government bonds to U.S. mortgage securities.

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