DAVID GREENE, HOST:
And this has been another tumultuous day in the financial markets. Stock prices plunged as soon as trading began here in the United States with the Dow Jones Industrial Average down by triple digits. And this comes after a big selloff in Asia and Europe. And once again, all this turmoil seems to have begun in China. We're joined from New York by NPR's Jim Zarroli. Hey, Jim.
JIM ZARROLI, BYLINE: Good morning.
GREENE: So tell us what is happening in China. It sounds like things got so bad so quickly, the government actually had to suspend trading there.
ZARROLI: Yeah, well, this week China's stock markets started using these circuit breakers which is something that we have in the U.S. stock markets, too. They're meant to curb volatility. So the way they work is that when stocks fall enough, trading is suspended for 15 minutes. And then if they fall even more, trading is suspended for the rest of the day. Now that happened this morning after just 29 minutes. Stocks had fallen so much that the markets shut down trading altogether. Now, these circuit breakers have only been in place this week, but they've already had to be activated twice. They were supposed to be sort of rarely used, but they've already been used twice. So after the markets close today, the Chinese stock market officials announced that they would stop using them.
GREENE: Well, is that an indication that the government feels like using those circuit breakers actually was having the opposite effect and making people more nervous?
ZARROLI: Well, I think it was certainly making a lot of investors angry because, as you can imagine, they were trying to, you know, sell their positions, and they were trying to trade. And after just a short time, they were told they couldn't do that. The Chinese stock market is trying very hard to be seen as respectable - to be, you know, on par with the other major stock markets in the world. And this is one of the reasons they're trying to cut down on volatility. But this just seemed to have the opposite effect, and there was a backlash.
GREENE: What's going on in China? I mean, for so many years, the government seemed to be guiding that economy so ably. And, I mean, what's going wrong?
ZARROLI: Well, I think that's what a lot of people are asking. I mean, China has been trying to change its economy so that it's less of an investment - you know, a capital-driven economy and more of a consumer-driven one. But I think there's a broad problem right now in that the leadership in Beijing is sort of losing credibility. I mean, China has - as you say, it's always been a top-down economy. The government has been steering things very well for a long time. But I think lately their efforts haven't succeeded as well. And I think a lot of investors are asking, you know, does Beijing really have a grip on this? What's - and what does it mean for the rest of the world? China is so big that its actions have consequences all over the place, and we're feeling that now.
GREENE: Well, let me ask you about those consequences. What is the view from New York in terms of how bad this could get for the U.S. markets?
ZARROLI: Well, I think the - I think one of the questions that's being raised is what it means for the Federal Reserve. You know, the markets are seeing less of a likelihood, I think, that interest rates are going to keep going up. In December, you had the Fed raise rates by a quarter point because the economy - the U.S. economy is improving. Everybody was predicting there would be more rate increases this year. But now a lot of people are wondering whether that's going to happen. They're looking at what's happening overseas and saying, you know, what does this mean for the U.S. economy?
GREENE: All right, we're speaking to NPR's Jim Zarroli about what has already been a tumultuous day in the financial markets, both in the United States and across the world, all linked, it seems, to a big fall in stocks in China. Jim, thanks a lot.
ZARROLI: You're welcome. Transcript provided by NPR, Copyright NPR.