China Markets Heading Into Bear Country

The New York Times reports:

The Shanghai composite closed down 4.3 percent for the day, and the drop in Chinese shares reverberated around the world as investors took note of the rapid decline.

China’s giant economy is set to outperform much of the rest of the world with growth of 8 percent or more this year, according to most economists. The Shanghai market has riveted the international investment community this year, gaining nearly 90 percent through July.

Many analysts, though, have been warning that loose lending has fueled an asset bubble.

The market’s fall during the past two weeks has been drastic: The Shanghai composite has now given up more than a third of the gains it had made since the start of this year.

See also “Dollar rally may be Shanghaied” from the Sydney Morning Herald and “Shanghai, Hong Kong rebound on commodity stocks” from MarketWatch.

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