Friday, May 25, 2007

Greenspan's Warning: China's stock market headed for a crash...

Greenspan's warning for China
The former Federal Reserve chairman Alan Greenspan says China's stock market is heading for a crash, threatening to ruin millions of middle-class investors. By Clifford Coonan
Published: 25 May 2007

In old-style Communist China, the stock market was a potent symbol of evil capitalism and the rise to power of Mao Zedong's hard-line Communists in 1949 brought an end to share-owning capitalism in China. Stock ownership was a capital offence.

These days, the middle class in the world's fourth-largest economy has gone equities-crazy. First-time investors, ranging from taxi drivers to Buddhist monks, pensioners to students to cash-rich entrepreneurs, are engaged in a frenzy of share buying that has seen prices rise 50 per cent this year and prompted fears of a speculative bubble. The former US Federal Reserve chairman Alan Greenspan's warning on Tuesday that the bubble might burst was therefore a potential disaster for millions of Chinese - particularly as market setbacks following his speech suggest the prophecy could be self-fulfilling.

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