This article was originally published by Canadian Business.

The outcome of the Brexit referendum clearly demonstrated the inherent volatility and fragility of global markets. What many people are missing, however, is that the financial impact of this largely political event comes nowhere close to the financial magnitude of events that led up to January 2016, a month we may look back on as a canary in a global economic coal mine.

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U.S. equity markets lost over US$1 trillion of value in January. In dollar terms it was the worst January in history. In percentage terms it was the eighth worst. What precipitated this violent and historic decline, and does it signal a future event of much greater magnitude?

Recent concerns over global economic growth and credit quality in China certainly played a role in January’s decline. As the second-largest economy in the world, and the fastest growing of the major economies, China has tremendous influence on global economic growth, not to mention the companies whose share values rely on such growth. As investors entered 2016 they became increasingly concerned about China’s declining growth – not just weak GDP growth estimates but also declining electricity usage, steel consumption and commercial rail car movement.

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Another layer to this story is the fact no other country in the history of the modern world has accumulated as much debt as fast as China. China’s debt as a percentage of GDP now stands at about 280%, versus 245% for Japan and 108% for the United States. Unlike Japan and the U.S., China accumulated the majority of its debt post-2008. This suggests many loans were given to sub-prime and non-investment grade borrowers.

Read the full story at Canadian Business.

Jarrett Hasson is a portfolio manager who has worked in the Canadian investment industry for the past 15 years. In 2013, he was part of a two-person team that won the Lipper Award for top alternative fund in Canada for three-year performance

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