China’s Bubble Bursts

All you people who were counting on China to bail the US out of the deficit-caused Bush Bust-Out, guess again:

It was the biggest party in the short history of the Chinese stock market – a rise of 500 per cent in the country’s top indices in Shanghai and Shenzhen, millions of new investors joining every day, champagne corks popping regularly as the latest once-creaking state enterprise unveiled its new sleek self for public listing.

But China’s stock market bubble has burst, leaving 150 million share investors waking up to their worst hangover ever. The combined effect of a vertigo-inducing rise in inflation, new regulations and a slowdown in the US economy has brought share prices down as quickly as they went up. Indeed, after further falls this week, Chinese shares are worth just half what they were last October, when the market peaked

One problem is the strength of the Chinese economy – and the inflationary pressures that has brought. Fears that government initiatives to tackle inflation will damage corporate profits has wiped $1.9 trillion off the value of Chinese companies since the beginning of the year. “The dive is the reflection of investors’ mounting concern about the economic scenario,” said Zhang Ling, a fund manager based in Beijing. “Runaway inflation is pretty bad for the economy and equities, raising costs and slowing earnings growth.”

Nor does the outlook for the global economy help confidence in China, which has built much of its boom on exports, the demand for which may now dry up. The rising cost of global commodities also threatens profits.

How bad is the fall? This bad:

It took just two years for China’s blue-chip share index, the Shanghai Composite share index to register a 500 per cent gain, rising from 1,000 to 6,000 points but it has taken only around five months for it to tumble from 6,000 to below 3,000.

We may well be in for something that makes the worldwide crash of the 1930s look pleasant in comparison.

Another ‘Victim’ of the Abramoff Probe

A Justice Department official has been convicted on “a single conflict-of-interest charge” for accepting “meals, concert tickets and luxury seats at Redskins and Wizards games from a lobbyist while helping the lobbyist and his clients.”

Conflict of interest? Sounds like bribery to me, but it was a plea deal.

The lobbyist is Kevin Ring, who worked for Jack Abramoff and who also is under investigation.

Coughlin … accepted the gifts from 2001 to 2003 while working on legislative affairs for the Justice Department. He later became deputy chief of staff of the department’s criminal division – the same division handling the Abramoff probe – before he resigned a year ago, citing personal reasons.

This isn’t the end of the story:

As part of his plea, Coughlin agreed to cooperate in the ongoing investigation. He has already offered substantial information about Ring’s behavior, based on details in court papers, and the papers also refer to at least two other unnamed Justice Department officials who ate out on Ring’s dime.
 

[…]
 

Coughlin’s cooperation is expected to be ongoing and [Judge] Huvelle did not set a sentencing date.