Greenspan chimes in on Chinese stockmarkets

I've written a couple of posts lately about the possibilities of a stockmarket bubble in China (More signs of a Chinese stockmarket bubble, 5/13/07, and Makings of a Chinese Stockmarket Bubble?, 4/29/07) . According to the New York Times (5/25/07), former Fed Chairman Alan Greenspan has chimed in as well. According to the Time article:

Mr. Greenspan, now 81, struggled to contain the tech stock boom, issuing his famous “irrational exuberance” warning in December 1996 only to watch the American market keep rising and finally collapse in early 2000. He tried his hand at forecasting Chinese stocks on Wednesday, telling an audience in Madrid by satellite that the Chinese market was “clearly unsustainable” and could undergo a “dramatic contraction.”

After setting records on Monday, Tuesday and Wednesday, the A shares, those traded in yuan, fell 0.47 percent in Shanghai and 0.6 percent in Shenzhen on Thursday as investors responded to the warning.

But the warning was not news to Mr. Zhou and other Chinese officials. The central bank, securities regulators and prominent business executives have all been cautioning investors that buying stocks is not a guaranteed path to riches — all with less apparent effect than Mr. Greenspan.

To reiterate my earlier warnings, developments in China can (and has) effects on an increasingly inter-linked, globalized financial markets.