China’s benchmark Shanghai Composite Index soared above 6,000 for the first time this week, renewing fears that the market, which has increased six times in value in the past two years alone, is about to crash, The Wall Street Journal reports.
Nonetheless, many observers say that the fact that more than 50 million Chinese have flocked to the stock market in recent years has strengthened China’s financial services industry, enabled it to become modern and resulted in more sophisticated investors—groundwork that will continue to help China’s economy grow.
Still, doomsayers fear that if China’s market crashes, it would wipe out the investor class, and with that come doubts as to what effect it would have on the market.
“Crises go with financial development,” reasoned Richard Sylla, an economic historian at the Stern School of Business at New York University. “The real question is whether they do lasting damage.”