UBS

James Mackintosh

Those of a bearish inclination have been having a hard time this summer in the west, but China is a whole ‘nother thing. The Shanghai Composite is at another three and a half year low, and has been falling, on and off, since its post-crisis peak in August 2009.

Another way of looking at China is to say it is suffering from the effects of an outrageous policy-induced bubble, which was partially reinflated by the government during the crisis.

This chart shows the Shanghai index against the Nasdaq during the dotcom bubble, both rebased. In green is the S&P 500. The wild swings in China and pure-play dotcoms make the booms and busts of the S&P look tame – but still left those investors able to get their money into Chinese onshore shares (protected by capital controls) better off, at least for the moment.

China v US bubbles