Beyond the markets, China's real economy is what matters

A stock market plunge in China prompted a global equity rout. Particularly hard hit were mining and commodity suppliers and automakers.

But financial markets are one thing, the global "real economy" quite another, especially when it comes to China. Its markets are structured in a way that limits financial contagion.

"You and I cannot easily buy stocks in the onshore Chinese stock market," said Brookings Institution senior fellow David Dollar, former World Bank China country director. "We don't have to worry that Americans have lost a lot of money. That's not happening. The market is fairly closed."

What really matters is the physical stuff bought and sold – or in this case not sold to China. Commodities are particularly hard hit. One index of metals and minerals prices plunged to half of last year's level.

Many analysts argue this is not a short-term business-cycle slowdown; China's entire economy is shifting away from smokestacks and cement mixers to consumers.

"It's created enormous overcapacity in steel, aluminum, glass, cement," said Mikkal Herberg, research director at the National Bureau of Asian Research. "And that's driven a huge decline in Chinese consumption of all these basic commodities."

That has also pushed down the price of crude oil. China is the largest importer of crude from Saudi Arabia, and its demand has slowed in tandem with auto sales. Growth in the Chinese new car market has fallen from more than 20 percent to 5 percent.

"Consumer confidence is not what it used to be," said auto consultant Michael Dunne, author of "American Wheels, Chinese Roads." "The other thing going on is cities are congested like never before. And the governments are making it more and more difficult to buy cars."