It wasn't a plane. It wasn't a man. It wasn't even Superman. So what was it the global stock market rout of late February? Was it the former US Federal Reserve Board chairman Alan Greenspan breathing aloud the "R" word about the American economy by year's end?

Was it the China syndrome, because the heavy sell-off started in Shanghai and razed through the world economy on the possibility that China's economic growth is finally losing steam ahead of steam? Or was it simply a long overdue correction after months and months of what Greenspan had once famously coined the "irrational exuberance" of stock market investors?

It was probably just that a correction. And a big one at that. So big because the sell-off at the Shanghai bourse was 9% after investors had sent it soaring to record levels a day earlier. It was the biggest one-day plunge in ten years. So grooving the hit Wall Street would take. Asian bourses, including Australia's, took mild to moderate jolts. But Wall Street took a whack. The Dow Jones index fell precipitously throughout the day's trade by 4.3%, then picked up in the last hour to close down 3.3%.

It was the worst pounding since Sept 17 2001 the first trading day after the Islamic extremists' terror attacks on America. Then blue chips tanked 685 points, or 7.13%. But this time stocks across the market were battered. Small-cap and technology stocks, the riskiest, suffered the most.

Australia's resource stocks, which have been riding on the coat-tail of Chinese economic expansion, saw a slump so big that it hurled boulders down investors' throats.

The pithy punditry of journalists is pitiable. Not that the stock market rout wasn't news. Dow Jones wires fingered Greenspan who warned his Hong Kong audience that current profit margin stabilization strategies usually mean the cycle is at a later stage sent cold-shivered investors' spines. The herd gathered pace and panic spread from Hong Kong to Shanghai.

Another global frenzy

Curiously, though, the Dow Jones wires story was time stamped 5.37 a.m. and posted on The Wall Street Journal Online on Feb 26. To Bloomberg's Caroline Baum, by the time the news hit Wall Street, it was "strictly third-hand", but enough to wipe US$1.34 trillion off global stock market capitalization in a day.

Markets recovered by the next day, and investors will quickly groove their next bout of irrational exuberance to recoup their losses with interest. And there are sufficient economists who would support the view that another global stock market frenzy is inevitable.

Bless their Economics 101 textual analytical abilities. Ed Peters, chief investment officer at PanAgora Asset Management in New York, tried to shed light on what happened. "Corrections usually happen," he said, "because of a catalyst, and this may be it." No kidding. But "it"?

A suicide bomber tried to take out vice president Dick Cheney whilst visiting the US Bagram base in Afghanistan. Surely Cheney can't be that important to world markets. It was news but that's about the sum of Cheney's value. Though Peters wasn't really referring to Cheney anyway. It was probably a musing, of sorts.

Here's what Peters did say that made sense, even if it is bleeding obvious: "The move in China was a surprise, and when a major market has a shock it ripples through the rest of the market. With all the trade that goes on with China, there tends to be a knee-jerk reaction with that kind of drop."

And that's probably the point that so easily escapes critical attention. The US economy may be the world's biggest and most important to the world economy. It sucks in the world's exports like no other. Testimony of this is America's chronic twin deficit dilemma, and made worse by the Bush administration's harebrained militarist foreign policy adventurism.

But if countries like Malaysia are so heavily reliant on the American market for its export-dependent economy, China would be almost totally dependent on the US economy staying healthy.

But here's the thing. It wasn't that the American economy sneezed and the rest of the world caught its contagious cold. It's the reverse. The Chinese economy sneezed and the rest of the world sizzled with Chinese burn.

Under-reformed economy

It says two things. One is just how almost completely reliant the Chinese economy has become on the US market. That's been clear for a long time now. What needs to be made even clearer, though, is just how big no, massive the Chinese economy has become that it is very prone to the slightest nerves that if its patron, the American economy, even so much as sniffles, that the Chinese economy could go pear-shaped faster than China's pro-market president Hu Jintao can draw the fruit.

All of which suggests that Chinese economic reforms are a long way from real structural reforms that will enable it to withstand the kinds of cyclical and structural pressures with within and external to its economy. One of the most serious problems of the Chinese economy is how under-reformed it has remained beyond the Deng Xiaoping market reforms of 1982.

In good governance terms, the Chinese economy is, like most of Asia's and the Third World's, in a colossal mess. It's riddled with rampant corruption throughout society and state institutions, including government. In economic policy terms, it's looking decidedly wonky by the year.

The Chinese economy is virtually nestled in the same groove today as the one Japan had cut for itself in the 1980s. And we know where that landed the Japanese for almost 13 years.