China’s stock market has risen at a delirious rate during the past two years, forming a substantial bubble in the country’s equity markets. Since PINR first noted this trend in February, the bubble has only grown — although there have been some short-lived downturns — and with it so have the risks inherent in allowing this unsustainable trend to continue.
With the politically important 17th National Congress currently in session, Beijing is in no position to calm the ever-expanding market for equities on the mainland. In the weeks following the meeting, several large and strategic companies will have their Initial Public Offerings (IPO) on the mainland, which the government will want to ensure go well. Yet, if Beijing does not act to calm the trend shortly after the five-yearly meeting, the fallout from the bubble’s burst will only be greater. [Full Text]