Chinese exports, a majority of which are from foreign-owned firms or affiliates, many American, depend on purchases from East Asian companies that supply inputs to the products the Chinese sell to the United States and elsewhere. Emerging Asia used to manufacture many goods that were then directly exported to the United States.
Loss aversion, rule-of-thumb, overconfidence, lumpy decision-making and pattern-seeking are characteristics long understood by behaviourists that can, with due care, illuminate many puzzling market outcomes.11 A more serious treatment of expectations is also high on the agenda. After all, information is costly both to store and to process. Hence, the cost of forming expectations has to be taken into account.