The more I learn about China's version of capitalism, the scarier it becomes.
In this week's Economist, Arvind Subramanian, an economist at the Peterson Institute for International Economics in Washington, DC, points out that China's ability to sustain its exchange rate stems in part from "financial repression and autocracy" (emphasis mine). Basically, China forces its domestic state-owned banks to buy its central-bank issued bonds paying only about 2% interest while it earns about 5% buying American Treasury bonds.
The Communist Party geniuses in charge of this probably figure they have subverted the underlying concepts of any market economy, namely the self-interest of parties involved and, at the stock market level, our old friends fear and greed. I wouldn't be surprised if some of them were convinced that no bubble exists at present in their stock market and therefore no crash will ensue: they will always be able to control investors' fear and greed. Needless to say, and many people all over the blogosphere have been saying it better than I, this will not end well.
The only thing is that I don't believe it will happen anytime soon. It might take a few years to play out.