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8/24/15

Chinese Economy: Why China’s stock market bubble was always bound to burst- by Orville Schell

The fact that Chinese stocks were climbing ever higher while the Chinese economy was cooling should have been an unmistakable warning of a bubble, but it caused surprisingly little concern. (Another reason to worry might have been the disparity in prices between so-called “A-shares”, which can only be purchased by investors inside China to keep the domestic market shielded from outside foreign manipulation, and stakes in the same companies available to foreign investors through the Hong Kong exchange, known as “H-Shares”.

This disparity suggested Chinese investors were bidding up prices well beyond any reasonable approximation of their value.) In fact, drawn by the casino-like profits to be made in the boom, more and more small investors flocked to the thousands of brokerage houses that are now proliferating in every Chinese city in order to buy and sell while staring up at flickering electronic data boards charting the rise and fall of equity prices.

Read more: Why China’s stock market bubble was always bound to burst | Orville Schell | World news | The Guardian

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