The stocks are still way up on their initial investments from a year ago. Some disillusionment is to be expected, and I think, this wasn’t anywhere near enough of a sell.

Modern capitalism is anchored on the free and frictionless flow of capital - another one of those wonderful ideas stemming from the Reagan Revolution. As a result of it, capital doesn't care about what happens to the market in a meaningful time frame, only what is happening today. If the economy collapses, that's totally fine, as long as there is still something with an upward potential. And there is always something with an upward potential, even if it's just investing in carrion feeders like pawn shops or subprime lending.

In fact, because it's so much easier and faster to destroy than to build, modern capitalism probably prefers the former. You take something that works, load up on shorts, wreck it into the ground, profit. That is definitely the lesson I learned from the hostile takeover of RJR Nabisco in the 80s.

Like a great many features of modern capitalism (aka Late Stage Capitalism), this is a direct consequence of frictionless capital flows. This could be entirely avoided by restoring taxes on stock sales within a certain amount of time. You sell after five years, no taxes; before then, regular sales tax. That simple change stops the spiral of doom.

Nope. The problem is they want to make money. China does too but it's not China's number one priority.

Investors can and will pull their money out. China will not.