[Atlantis]

Forget about Greece; that was yesterday. In China, the government has encouraged its citizens to invest in stocks for years. However, in the last 3 weeks stocks have lost about 30% of their value. The “Financial News” (official publication of the central bank) blames Morgen Stanley, which had recommended selling Chinese stocks, for why 90 million Chinese lost 2.4 bln in 3 weeks. It continues by claiming that the US follows “hidden motives” and asks if the US is trying to torpedo China’s reforms. The country is in shock and engages in a witch hunt for the culprits that ended the long-lasted boom. 470 of the 2,800 titles were suspended from trading on Friday. In the last week, 100 companies took their stocks off the market due to excessive losses.

Politicians are in panic because it isn’t only that small savers have lost but also country’s elite. China’s 45 richest have lost 34 bln in June (socialism has come a far way ;-)). The mood is getting dirty and criticism of the government increases on the Internet. Analysts say that the government should save the market “with money and not with empty words.” If the bubble bursts and China’s overrated stocks crash there would be serious consequences for the banks, consumption and industry. Analysts are telling the government to set up a rescue fond worth 75 to 100 bln USD to stabilize stocks. Government officials, who lost substantial amounts, are among those promoting this plan (real handy to have a government job ;-)).

FAZ (in German)

[Igor Antunov]

Unless it drops another 70% by the end of the year (maybe the dinosaurs return too while were at it), stock market will have experienced explosive net gain since 2014, having doubled in value. This growth in the past quarter was always excessive expansion, it had to cool and moderate its pace.

If the bubble bursts and China’s overrated stocks crash there would be serious consequences for the banks, consumption and industry.

The mini-stock bubble already burst, and no, there have been few if any consequences on those fronts.

[Atlantis]

Unless it drops another 70% by the end of the year (maybe the dinosaurs return too while were at it), stock market will have experienced explosive net gain since 2014, having doubled in value.

All those millions of small investors or party cadres who went into the market while it was high have been in a shock nevertheless. And those who bought stocks on borrowed money are now in deep shit. That makes a lot of unhappy people and the government wants the people to be happy. Remember there is no safety valve in China in which you can get rid of your hated government in the next election.

But yes there is already a massive bubble. Stocks are too high. But since the government doesn't want the stocks to fall (because of the unhappy people) it frantically pumps more money into the market. And what happens if you keep on inflating the bubble? Exactly! There is going to be a nasty awakening somewhere down the road. Better stay out off Chinese stocks for a while. Europe is a much safer place.

[Potemkin]

For once, I agree with Atlantis. The Chinese government has a problem which Western governments (in general) do not - it requires stability and predictability above all else if it is to survive in the long term, yet it has yoked itself to an economic system which is inherently unstable and unpredictable - capitalism. Western governments have created a safety valve, as Atlantis points out, by symbolically dissolving and reforming themselves every four or five years while keeping the same social and economic elite in power. The Chinese government doesn't have this symbolic form of faux-revolution to allow the population to let off steam every few years. Political pressures could therefore build up over the long term, with potentially disastrous consequences. Hence the panicky reaction to this market correction.

[Igor Antunov]

All those millions of small investors or party cadres who went into the market while it was high have been in a shock nevertheless.

Precisely 40 million private buyers caused this mini bubble in the space of 3 months, chiefly with their own savings; This is insignificant, 150 million LOST THEIR LIVELIHOODS in 2008-2009. Did they riot?

Remember there is no safety valve in China in which you can get rid of your hated government in the next election.

Once again, this is insignificant relative to what kind and magnitude of shocks swathes of the populace experience every year. In Shanghai itself the biggest protests have involved a newly opening factory. Tens of thousands of people clashing with police, you maybe heard about it once or twice on the news.

Who's protesting their stock market gamble?

This is a country in which 1 million can force-ably me moved from their homes to make way for new airports. Think about that for a second. The safety valve consists of the ability of the Chinese state to crush dissent without blinking an eye, to arrest 60,000 overnight for using the internet in illegal ways, etc.

You know nothing about the way this country operates, about the risks and consequences of those risks Beijing deals with every day. Pre-2010 the shanghai stock exchange was not even registering on the international markets. What is being 'lost' in the mini bubble burst this month is 1/10th of what was gained in the last couple of years. The inability of western troglodytes to deal with the long-term both past and future is shocking, chiefly the reason I'm rooting for the other team-it is going to win. Why side with a bunch of goldfish.

[Atlantis]

You know nothing about the way this country operates,

But you do?

For how long have you done business in China?

I have always written about the incredible success of the Chinese economy and how Europe fails to pick up the challenge, but to close my eyes to potential problems would be very foolish indeed.

Your argument is one-sided and without substance.

[Igor Antunov]

For a number of years.

China, collapsing/in crisis since 1978.

To call this a crisis is to overlook the 10 other crises since market reforms began-which had far more encompassing impact on the country and which are now conveniently forgotten every time a new 'crisis' crops up. The opinion piece media is pulling at article click-spam straws, the see-saw hyperbole is nauseating.

[Atlantis]

The opinion piece media is pulling at article click-spam straws, the see-saw hyperbole is nauseating.

There is no denying that the foreign media gives a distorted image of China, it is both too positive and too negative. But the Anglophone media paints an equally distorted image of continental Europe.

But that doesn't prove that the current bubble won't be the big one. I'm not a free-market ideologue, but nobody can deny that the free market does have certain advantages. The Chinese are about to inflate the bubble for political reasons. That distorts the market forces and leads to greater problems down the road. In a way, Europe has the same problem. We had to prop up failing economies for political reasons while ignoring economic good sense.

[Nattering Nabob]

Forget about Greece; that was yesterday. In China, the government has encouraged its citizens to invest in stocks for years. However, in the last 3 weeks stocks have lost about 30% of their value. The “Financial News” (official publication of the central bank) blames Morgen Stanley, which had recommended selling Chinese stocks, for why 90 million Chinese lost 2.4 bln in 3 weeks. It continues by claiming that the US follows “hidden motives” an asks if the US is trying to torpedo China’s reforms. The country is in shock and engages in a witch hunt for the culprits that ended the long-lasted boom. ]

Goldman Sachs Says There’s No China Stock Bubble, Sees 27% Rally

China’s biggest stock-market rout since 1992 has done nothing to erode the bullish outlook of Goldman Sachs Group Inc.

Kinger Lau, the bank’s China strategist in Hong Kong, predicts the large-cap CSI 300 Index will rally 27 percent over the next 12 months as government support measures boost investor confidence and monetary easing spurs economic growth. Leveraged positions aren’t big enough to trigger a market collapse, Lau says, and valuations have room to climb.

Goldman Sachs is sticking with its optimistic forecast in the face of record foreign outflows, the biggest-ever selloff by Chinese margin traders and a chorus of bubble warnings from international peers. The call hinges on the success of unprecedented government efforts to revive confidence among individual investors who watched equity values tumble by $3.2 trillion over the past three weeks.

“It’s not in a bubble yet,” Lau said in an interview. “China’s government has a lot of tools to support the market.”

Link

Perhaps the US govt has had a change of heart...or perhaps they are demonstrating that the Chinese economy is only putty in the hands of the Lizard Overlords™.

Chinese dragons are made of paper and paper gets burned a lot...

[unbalanced zealot]

The stock market volatility in China ATM may not be overly problematic long term. It's basically a shake out of past gambling rather than being reflective of the broad economy on the dive.

A large number of people are going to take a hit, but that's gambling. As the Chinese investor population matures it will be more astute and start to demand greater transparency, legal and accounting frameworks to make informed decisions. This will probably coincide with less easy money and as a cultural thing China will have to wean itself off that drug. Xi/Wang Qishan's anti corruption campaign will impact too but will take a lot of effort to work it's way thru stock amrkets and the like.

[Godstud]

Any problems China has, will be visited 2 fold to the US, who relies heavily on Chinese imports.

[Atlantis]

Meanwhile Chinese stocks continue to fall despite massive government intervention. Shanghai was down another 7% this morning and nearly half of all Shanghai titles have been taken off the market. The credit-driven bubble risks imploding.

Any problems China has, will be visited 2 fold to the US, who relies heavily on Chinese imports.

Why is that important? The Chinese are not going to stop manufacturing, just like they are not going to stop eating or breathing.

[Godstud]

You'll see prices jump, and that will affect trade. USA and China are inexorably linked.

[Igor Antunov]

Still sitting on a +70% yearly return: http://www.bloomberg.com/quote/SHCOMP:IND

Will have to drop another 100% to reach January 2015 levels.

[Thompson_NCL]

Still sitting on a +70% yearly return: http://www.bloomberg.com/quote/SHCOMP:IND

Will have to drop another 100% to reach January 2015 levels.

If lots of people start throwing their money into the stock market, its bound to grow rapidly. That is not a sign of economic success in itself and it is not necessarily a good thing.

In fact all it means in this case is that a lot of people have exposed themselves to a potentially huge market bubble, because Chinese economic performance is down right now.

Everyone in China essentially gambled their savings on economic growth and their ship did not come in. A few more months like this and China is in serious trouble.

[Noelnada]

Can we expect a chinese-american economic conflict of epic proportion in the coming months ?

[Thompson_NCL]

Still sitting on a +70% yearly return: http://www.bloomberg.com/quote/SHCOMP:IND

Will have to drop another 100% to reach January 2015 levels.

About that 70%....

[Igor Antunov]

1.5% of China's economy is tied up in equities. As opposed to 15-30 percent elsewhere. Seems US, Australian markets are down the shitter. Contaigon has spread. $50 billion wiped away in 20 minutes during Sydney trading. International markets are being hammered. Even Norway starting to tank (so much for that oil piggy bank) and the middle east markets are down across the board. The perfect storm given what's happening alongside this.

[Thompson_NCL]

Many international markets have rebounded in the last hour, mostly because the recent losses are regarded more as a natural correction than anything else. The Chinese meanwhile are throwing their pension funds into the market to try and offset the losses.

Yeah, its the West which is losing here. Of course.

[Atlantis]

You'll see prices jump, and that will affect trade. USA and China are inexorably linked.

We are all more or less linked. And the bigger China gets the more we are influenced by what's going on in China. However, rising prices for Chinese goods are not a problem; on the contrary, most want China to increase the value of its currency, which would result in higher prices for Chinese made goods.

Since China is now the 2nd biggest economy on the verge of becoming the biggest, an economic slump in China or a financial meltdown would have repercussions worldwide.

As confidence in China declines, investors are going to take their money elsewhere. According to some reports, more than one or two trillion USD have been pulled out of the Chinese economy recently. China and the emerging markets aren't going to pick up any time soon.