Commentary by William Pesek
(Bloomberg) -- China’s stock-market boom is as clear a bubble as you will find, the conventional wisdom says.
When might it burst? Nobody knows if it will.
The Shanghai Composite Index has surged 45 percent this year. Just because China has deep pockets in this time of global crisis doesn’t mean its economic health supports this rally. Resources of China’s magnitude are a nice thing to have at the moment. And while probably too late to buy into the market, investors who are already there won’t be disappointed.
In a sense, buyers are betting on China’s socialist tendencies rather than its success in fostering free markets. Cash-rich China has simply built a better bubble. Rather than boding well for China’s long-term outlook, this rally serves as a reminder of risks facing the world’s third-biggest economy.
The strength of China’s fiscal position got a headline- grabbing endorsement this week from Nobel Prize-winning economist Joseph Stiglitz. At a May 13 forum in Beijing, Stiglitz said China “has taken very rapid action to address the crisis” and may emerge as “a winner.”
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Ruin-Nation
11 months ago
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