The hype around China is seductive, especially when we're mired in a recession. Any ray of hope is worth a few minutes of our time. Even a turning economy isn't enough ... it hasn't turned yet! So, we have the promise of China.
Well, China is about to learn about the downside of capitalism. A bear market could be threatening the country, driving home the notion that free markets (even if only slightly free) involve some risk, and proving to the American public that inside every sure thing is a hefty dose of "flavor of the month." The bears are circling Shanghai, even as the U.S. equity market appears to be coming back.
Before today's 4.5% gain, the Chinese stock market was down 20% from its August 4, 2009 peak. It's received a bit of a respite on a global rise but remains close enough to recession levels that it matters to people's lives, which is ultimately how the strength of an economy is judged. Yesterday, the domestic Shanghai A-share stock price index fell more than 4%, though today's gains have offset that result.
All of this comes on the heels of rapid growth: the Chinese stock market doubled from its November 4 low to its recent high, so a downward revision makes sense.
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