Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Moominoid who wrote (62457)	4/25/2005 2:36:11 AM
From: shades	Read Replies (1) of 74559

I don't understand MOO - does corruption explain this chart? elliottwave.com China's economy grew by 53% from 2000-2004, to become the sixth largest in the world (nominal GDP). If this growth rate holds for a few more years China's economy will surpass the economies of France and the United Kingdom. By one generous measure of GDP (purchasing power parity), China's economy is already second only to the United States. An immense number of foreign-invested enterprises have moved to China in the past five years, and in turn they produce some 45% of the country's exports. China's foreign exchange reserves have more than doubled in the past two years ($659 billion from $316 billion). Some estimates put China's middle class at 100 million people; perhaps more impressive still is how many Chinese are now "retail investors" -- 60 million, according to the Wall Street Journal. All that said, let's turn to China's stock indexes. Have they followed the economy's blistering growth rates? As usual, a chart offers the best answer to a question like this. Oops. That's even uglier than a chart of the NASDAQ over the same period; trust me, I looked. Now, I need to note that equities in China remain subject to a heavy degree of state ownership and control, which in turn has led to rampant cronyism and corruption among state regulators. (Yes, there is something worse than the SEC.) But even widespread corruption shouldn't keep a good stock market down THAT far -- certainly not if it's supposed to "follow" an economy that's growing at a double-digit clip each year. In truth, of course, the conventional wisdom is mistaken. If anything, this chart of China's stock markets should give deep pause to anyone with a stake in China's economy.

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