China’s “mad” stock market spiralling out of control

Excerpt: The last collapse of the Chinese stock market in 2001 affected a relatively small layer of better off investors. This time, however, the social consequences could be on a far bigger scale, as the number of investors is rapidly approaching 100 million. Many of them could lose everything—their homes, savings and pensions—in a vicious lesson in capitalist economics. The social and political consequences may well be explosive.

China’s frenzied stock market passed another extraordinary benchmark last week. On May 9, it recorded a trading volume for that day which was bigger than all the other share markets in Asia combined, including in Japan, the world’s second largest economy.

According to the Financial Times, the value of shares traded daily on the Shanghai and Shenzhen markets was $5 billion six months ago. On March 30, it hit $16.4 billion. Last Wednesday, the figure reached $49 billion—nearly double that of Japan and triple the combined trading volume of Australia, Hong Kong, Thailand, Singapore, Malaysia, Korea, India, Taiwan, Indonesia, New Zealand and Vietnam.

While still less than half the $122 billion in shares that were traded in the US on May 8, the Chinese share market eclipsed the trading volume in Britain of $29.4 billion. At the same time, the total capitalisation of Shanghai and Shenzhen stock markets of $2.2 trillion is still well below that of Japan at $4.7 trillion and eight times less than the $16.5 trillion of the US.........