CHINASSTOCK MARKET BUBBLE:-China is the worlds seond lar!est sto" #ar"et in ter#s o$ #ar"eta%italisation & inase o$ listed o#%anies' it was (()*+ %er ent o$ ,-. in /01/2 ' a$ter USA) Chinese sto" #ar"et inde3 had risen as #4h as 110 %erent $ro# No5e#6er /01( to a %ea" in 74ne /018)-E5er sine 1/ 74ne /018' it has olla%sed at an inredi6l9 ra%id %ae) It has %l4##eted 69 well o5er /0 %erent' and #ore than + trillion dollars o$ :%a%er wealth; has 6een wi%ed o4t)-The 5al4e o$ this #assi5e dro% in the sto" #ar"et is #ore than the ,-. o$ Braer ?@ealth Mana!e#ent .rod4ts &@M.2 $or in5est#ent that %ro#ises the se4rit9 o$ a sa5in!s ao4nt with hi!h ret4rns) Howe5er' the 6an"s' in t4rn' in5est @M. $4nds in wa9sthat are #4h ris"ier) -A6o4t +0 %erent o$ @M.s !4arantee ret4rn o$ %rini%al' and A0 %erent are not !4aranteed) B4t a lot o$ ordinar9 in5estors 6elie5e that their in5est#ent is sa$e)-Bor this %4r%ose' the 6an"s 4se Tr4st Bir#s' alled' ?U#6rella Tr4sts as ond4its' to in5est #one9 in $4nds that %iles 4% a%ital diretl9 into the sto" #ar"ets)-Besides the 6an"s #a"in! indiret in5est#ents into sto"s' a lot o$ o##on %eo%le started 649in! sto"s with 6orrowed #one9' a %ratie' "nown as Ctradin! on #ar!in)C-Earlier the Chinese !o5ern#ent had i#%osed a lot o$ restritions onCtradin! on #ar!in'C 64t the a4thorities ha5e !rad4all9 loosened the re!4lations sine /010)-In order to %re5ent s%e4lati5e in5est#ents' ertain sa$e!4ards were instit4ted 69 the !o5ern#ent' li"e onl9 hal$ o$ the in5ested $4nds o4ld 6e 6orrowed and also restritions on whih sto"s 9o4 o4ld 649 and how lon! the #one9 o4ld 6e 6orrowed' et)-Nonetheless' o##on %eo%le o$ China ontin4ed to Dnd 4nethial and reati5e #eans to in5est 6orrowed #one9 into ?hi!h ris" - hi!h di5idend $4nds) This %ratie o$ #a"in! in5est#ents with 6orrowed $4nds is "nown as ?le5era!e)-So' 6orrowed #one9 Eooded into the Chinese sto" #ar"et 6etween 74ne /01( and 74ne /018' hel%in! to %4sh sto" %ries 4% 180 %erent)-Not ta"in! into ao4nt the #one9 in5ested thro4!h the 6a"-door #ethods' d4rin! this %eriod' the a#o4nt o$ oFiall9 santioned #ar!in tradin! in the Chinese sto" #ar"et 6allooned $ro# (0+ 6illion G4an to /)/ trillion G4an)-In A%ril' Chinese a4thorities 6e!an to instit4te orreti5e #eas4res to restrit s%e4lati5e in5est#ents thro4!h #ar!in tradin! and all other $or#s o$ le5era!ed in5est#ents' whih had reated an artiDial 6466le in the sto" #ar"et) -The re!4lators ra"ed down on 6an"s 4sin! @M.s to $4nd sto" #ar"et in5est#ents and sto" 6ro"ers 4sin! U#6rella Tr4st to hel% their 4sto#ers e5ade li#its on #ar!in tradin! were 6anned)-The !o5ern#ent=s to4!hest #eas4res a#e on 1/ 74ne /018' when China=s se4rities re!4lator anno4ned a new li#it on the total a#o4nt o$ #ar!in lendin! sto" 6ro"ers o4ld do' while also reiteratin! the 6an on illiit #ar!in tradin! thro4!h #ehanis#s li"e4#6rella tr4sts)-Chinese sto"s ha5e 6een $allin! e5er sine that 74ne 1/ anno4ne#ent)-In a n4tshell' Chinese !o5ern#ent rela3ed a r4le that had earlier li#ited #ar!in tradin! to the wealth9 %eo%le onl9) So' /0 #illion %eo%le o%ened sto" #ar"et ao4nts in /018 alone and ind4l!ed in #ar!in tradin! with le5era!ed in5est#ents) The 6orrowin! #a!niDed their !ains as the #ar"et rose) @hen the Chinese !o5ern#ent restrited #ar!in tradin!' the sto" 6e!an to $all and the le5era!e #a!niDed their losses too) I#%liations o$ Chinese Sto" Mar"et CrashShort-Ter# I#%liations1)Man9 ordinar9 Chinese %eo%le had 4sed their o#%lete li$es sa5in!s and in so#e ases' #ort!a!e their ho#es to in5est in sto"swill 6e rendered %a4%ers o5erni!ht)/)The in5est#ents #ade into s%e4lati5e real estate %roHets or 64siness 5ent4res' has in5aria6l9 reated an artiDial 6466le in those s%aes also) The 64rstin! o$ 6466le in these s%heres wo4ld $4rther o#%o4nd the losses o$ the in5estors)Mid Ter# to Lon! Ter# I#%liationsIn the #id-ter# and lon! ter# senario' the rashin! o$ the sto" #ar"et #a9 herald a Chinese eono#i olla%se in /018 and the earl9 indiators o$ the sa#e are !i5en 6elow:1)Sl4#% in the Ind4strial .rod4tionInd4str9 has 6een the #aHor dri5in! $ore 6ehind the Chinese eono#i !rowth) In Be6r4ar9' ind4strial %rod4tion !rowth has reeded to H4st I)JK) It was 1J)8K d4rin! the %re-!lo6al reession era in Be6r4ar9 /00A)Bi3ed-asset in5est#ent &the %4rhase o$ an9 %h9sial asset2 is a leadin! indiator o$ $4t4re #an4$at4rin! ati5it9' is also down 69 (K $ro# last 9ear)/)Cons4#er S%endin! Ballen -rastiall9In order to !i5e an i#%et4s to the ind4strial !rowth' the do#esti ons4#er s%endin! needs to 6e hi!h' so that reliane on $orei!n e3%ort an 6e red4ed) Howe5er' d4e to the #ar"et 4nertainties' the retails sales in the %resent ti#es in China are at its slowest %ae in the last nine 9ears)+)Ho4sin! Mar"et in China is Colla%sin!The ho4sin! #ar"et in China #a"es 4% a6o4t /8K o$ the eono#9) -4e to the a6o5e #entions reasons' as also' when in5estors will de$a4lt on what the9 ha5e 6orrowed' as sr4tin9 in the ho4sin! #ar"et !rows' the real estate %ries will t4#6le)A latest s4r5e9 re!ardin! real estate trends in Chinas lar!est ities shows that I1 o4t o$ the A0 #aHor it9 entres ha5e e3%eriened a %rie delines)()Chinas National -e6t Soarin!Chinas %resent de6t-to-,-. ratio stands at /J/K) The sa#e is onsidered to 6e e3tre#el9 hi!h) In need to 6e $4rther noted that' these de6t al4lations not onl9 inl4de !o5ern#ent 6alanes' 64t also those o$ ho4seholds and non-Dnanial or%orations)Connetin! with the %re5io4s %oint' it needs to 6e noted that hal$ o$all the said loans are lin"ed' diretl9 or indiretl9' to Chinas o5erheated real-estate #ar"et' whih is sl4#%in!)Hene' an eono#i de%ression in China' a4sin! it to de$a4lt on %a9#ent o$ so5erei!n de6ts' #a9 tri!!er another ,lo6al eono#i #eltdown as it ha%%ened in /00J)IM.ACT ON @ORL- ECONOMG:China=s was an isolated sto" #ar"et) It had no i#%at on the world #ar"ets' when China sto" indies do46led and tri%led in a 5er9 short s%an o$ ti#e) So' a rash in China=s #ar"ets is 4nli"el9 to res4lt in a #aHor i#%at on other e#er!in! #ar"ets) As re!ards India' a rash in Chinese sto" #ar"ets o4ld ha5e no diret ne!ati5e i#%at on India=s sto" #ar"et) Howe5er' indiret i#%at o$ Chinas eono#i slowdown o4ld 6e that the ons4#%tion o$ !oods and ser5ies will deline' whih wo4ld ad5ersel9 a>et de5elo%ed eono#ies li"e the USA) A$ter all China is the lar!est ons4#er o$ a n4#6er o$ !oods and o##odities in the world)A #aHor red4tion in the ons4#%tion o$ !oods and ser5ies' o4%led with Chinas ina6ilit9 to hono4r the de6ts #a9 herald another world eono#i reession)So#e eono#i anal9sts also $eel that an eono#i downt4rn in China o4ld #ean inreased in5est#ents o#in! into India' %ro5ided we 4tilise the o%%ort4nit9 well and e3e4te the eono#i and s9ste#i re$or#s 6ein! %ro#ised to the in5estors in do46le ti#e)@hate5er 6e the ase' the ne3t two 9ears' i)e) /018 L /01I are !oin! to 6e hi!hl9 si!niDant $ro# the %oint o$ 5iew o$ o%enin! a new ha%ter in the eono#i histor9 o$ India' whih e5en as %er the IMB Re%ort is at a 4s% o$ 4%ward eono#i traHetor9 and will o5erta"e China in its %roHeted !rowth)