Disconnect from real economy

Even the most optimistic economist would not have predicted the ongoing boom in the property and stock markets in China. Just eight months away from the lowest ebb of the global financial crisis - the worst since the Great Depression of 1929 - all pessimistic talk of the economy has gone with wind. Now everyone seems to be beaming with confidence in future.

The mainland stock market has so far rebounded more than 75 percent from last year's trough, when the benchmark Shanghai Composite Index touched 1,664. Investors are guessing when it will breach 3,500 as the psychological level of 3,000 is so close within reach.

Prices for developed property in cities such as Beijing, Shanghai, Guangzhou and Shenzhen have skyrocketed back to the level seen in the giddy days of 2007, after being at a discount of 20 to 30 percent in the second half of last year following the burst of the property bubble. A Reuters poll has forecast that housing prices nationwide will continue to rise 10 percent between now and the end of 2010.