View: As China’s Markets Melt, Echoes of 2008

July 13, 2015 by Loch Adamson

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People's Bank of China headquarters, Beijing With Chinese stocks tumbling, the government has scrambled to prop up shares and has even enlisted the country’s sovereign wealth fund to help stabilize the market. But history shows battling primal market forces of fear and greed can be difficult. The contracting market for China A-shares and their ilk carries with it more than a whiff of 2008. Certainly the sharp reset of overpriced assets in Shanghai and Shenzhen brings to mind parallels with the collapse of the U.S. housing and other markets seven years ago. Back then, enabled by government connivance or negligence, a U.S. housing bubble of massive proportions was allowed to develop, even encouraged, fostering a dangerously profligate spell of easy lending. Home buyers, residential builders, mortgage originators and banks all went to town. When housing prices and related subprime securities and derivatives began to revert, as they must…

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