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China's stock market now losing more money for investors than any other

By Catholic Online (NEWS CONSORTIUM)
July 31st, 2013
Catholic Online (www.catholic.org)

China's unsurpassed economic growth helped lead the global economy out of a recession and won the admiration of international luminaries four years ago. Now, in a sudden reversal of fortune, China's stock market has lost more money for investors than any other in the world. The situation has left many in the international community nonplussed, as China's economy seemed invincible such as short time ago.

LOS ANGELES, CA (Catholic Online) - Indicative of this sudden shift, the Shanghai Composite Index, which doubled in 10 months through August 2009 has tumbled 43 percent from its high, destroying $748 billion in market value. This came as the Chinese government poured $652 billion of stimulus into building roads, railways and housing. 

Only Greece's ASE Index (ASE) has fallen more in percentage terms. The Standard & Poor's 500 Index, the benchmark gauge of American equity has since erased all of the losses from the worst recession since the Great Depression and has gained 68 percent since the China peak.


Looking unbeatable in 2009, China surpassed Germany as the world's third-largest economy and growing six percent in the first quarter while the U.S. shrank four percent. Templeton Emerging Markets Group Executive Chairman Mark Mobius, who oversees about $53 billion, said in July 2009 that China's stock market could be larger than America's in three years. Things change: China is poised for the weakest expansion since 1990 as the government orders more than 1,400 companies to close factories.


"The Beijing consensus as endorsed by some western observers as an alternative to the market economy is indeed a sham," Hao Hong, the Hong Kong-based head of China research at Bank of Communications Limited says. "Now we are all paying for it."


While China contributed most to the global economy's rebound from the 2008 financial crisis, growth is now slowing as the Communist Party reins in an unprecedented $1.6 trillion lending boom in 2009. That fecund period helped send home prices to all-time highs and left local governments with record liabilities. 


Premier Li Keqiang is attempting to change China, where per-capita incomes are 88 percent lower than in the U.S. into a consumer-led economy from an exporter reliant on a managed currency.


Chinese companies dropped out of the ranks of the world's 10 biggest by market value for the first time since 2006 last month. 


China's stock market has since been described as a "dead animal," according to Carter Worth, the New York-based chief market technician at Oppenheimer & Co.


For all of its destruction of wealth, the China bear market is dwarfed by the Great Crash when the Dow Jones Industrial Average declined 89 percent from a peak in 1929 to a low point in 1932, according to data compiled by Bloomberg. 



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