Meanwhile, in Shanghai

Bubble, bubble, toil and trouble:

Foreign investors are selling Shanghai shares at a record pace as China steps up government intervention to combat a stock-market rout that many analysts say was inevitable.

Sales of mainland shares through the Shanghai-Hong Kong exchange link swelled to an all-time high on Monday, while dual-listed shares in Hong Kong fell by the most since at least 2006 versus mainland counterparts. Options traders in the U.S. are paying near-record prices for insurance against further losses after Chinese stocks on American bourses posted their biggest one-day plunge since 2011.

How will the Chinese government react? Early results aren't particularly encouraging:

The latest attempts to stem the country’s $3.2 trillion equity rout, including stock purchases by state-run financial firms and a halt to initial public offerings, have undermined government pledges to move to a more market-based economy, according to Aberdeen Asset Management. They also risk eroding confidence in policy makers’ ability to manage the financial system if the rout in stocks continues, said BMI Research, a unit of Fitch.

“It’s coming to a point where you’re covering one bad policy with another,” said Tai Hui, the Hong Kong-based chief Asia market strategist at JPMorgan Asset Management, which oversees about $1.7 trillion. “A lot of investors are still concerned about another correction.”

It's likely that the Chinese government doesn't have that many options left. As things deteriorate, will the government try to distract the populace through some foreign policy bellicosity in the region? That's a possibility as well. As the old Chinese curse has it, may you live in interesting times. It's getting interesting, all right.