'Dangerous Bubble' Emerging in China

It's reminiscent of the US dot-com bust
By John Johnson,  Newser Staff
Posted Nov 27, 2010 10:23 AM CST
In this file photo, the Chinese national flag stands near a branch office of the Industrial and Commercial Bank of China at the Shanghai Stock Exchange.   (AP Photo/Eugene Hoshiko, File)

(Newser) – American investors are gaga about China, and there's good reason to remain bullish about the nation's economy, writes Shaun Rein at Forbes. Just not too bullish: "A mania about China has gripped too many investors," he warns. "Anything with China in its name gets hot in the way dot-com got people's blood pulsing in the 1990s." He notes in particular two online video companies about to go public, Tudou and Youku, that have generated huge interest—without clear business models on how they're actually going to make money.

That should ring some dot-com bells. "There is undoubtedly a bubble emerging in some of the stock prices of Chinese companies, so be really cautious about where you place your bets in the coming months," writes Rein. "Personally, I wouldn't put money into any public company that hasn't proven able to turn a profit."

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