The fall of chinese market

Chinese Stock market has lost 25% from the top and 50% from the bottom. Shanghai Index had gone from approx 1700 to approx 3400 in the recent rally. In the last few days, it has fallen to 2700. Is it the start of imminent retracement of the great bull run? It could well be true as very few people know what happens in China. In the past, when the Chinese economy was growing year on year, there was doubt about its growth and sustainability, however, it still grew and people were proved wrong. This time people have been expecting China along with other parts of Asia to take the world out of woods. Will they be proven wrong again?

The current rally has primarily been based on liquidity and availability of cheap money. Going forward if the liquidity tightens and interest rates rise, all the good feeling could reverse quickly and we could be back in 2008.

To make it a possibility, let me tell you what I heard a yesterday. Any decent size Indian real estate company has held back salaries of employees for more than 6 months as the companies dont have the money to pay. Most of such company stocks have gone 3-4 times from the bottom and QIP has happened like no tomorrow... I dont know what market is valuing the companies for..