Shanghai: 2000 or Less

FN: I couldn't agree more. The Chinese economy is swamped with overcapacity. Overcapacity was already a problem in 2007 BEFORE the world economy imploded. Now with exports cut in half and not likely to recover for many many years, the number of idle factories, equipment and people are at critical levels.

China’s Market ‘Should Be 2000 or Less,’ Xie Says (Update1): "China’s economy isn’t “sustainable” and the Shanghai Composite Index, now at 2667.75, “should be 2000 or less,” former Morgan Stanley Asian economist Andy Xie said in an interview.

Xie, who correctly predicted in April 2007 China’s equities would tumble, told Bloomberg Television that the stock market remains “in bubble territory.”

China’s stocks plunged today, with the Shanghai index falling the most since June 2008 and entering a bear market, on concern a slowdown in lending growth may derail a recovery in the world’s third-largest economy.

The Shanghai gauge slumped 22 percent this month as banks reined in lending to avert asset bubbles and policy makers advised industries such as steel and cement to curb overcapacity.

The decline stopped a rally that had sent the measure up 103 percent from a November low on prospects the government’s 4 trillion yuan ($586 billion) stimulus program and a record amount of new loans will ensure the economy grows at least 8 percent this year."