Will the Chinese Stock Market Crash?

Investment firm JP Morgan has said in a note that Chinese Market is entering into a bubble zone and might crash soon and quoted former Fed Chairman Alan Greenspan on 23 May 2007 that the boom in China is “clearly unsustainable” and would give way to a “dramatic contraction at some point”.This may to some think that Chinese markets are going to crash tomorrow, especially after the debut of PetroChina with a market capitalization more than India’s GDP. But the fact is not so. Comparison between China and US (biggest economy) and Japan (second biggest economy) during bubbles in US and Japan will reveal that China is far from a crash. During a market crash in US and Japan the Market Capitalization to GDP ratio was around 1.4 while that of China in May was only around 0.8. But surprisingly when former Fed Chief made his famous “ irrational exuberance” comment US Market Capitalization to GDP ratio was 0.7 and his comment on China came when it’s same is about the same. But troubled times has perhaps come because the Chinese Market Capitalization to GDP ratio in October has touched 1.6 way above the 1.4 that US and Japan had just before there markets crashed