China remains the world’s fastest growing large economy. Even if its GDP improvement has slowed, the leadership of the People’s Republic still expects gross domestic product to rise 7.5% this year. With that improvement goes the hope that China’s GDP will pass that of the United States within two decades. However, the strength of China’s stock market does not reflect these facts.

Over the past year, the Hang Seng Index is off 2%, compared to a 29% rise in the S&P 500. The index includes some of China’s largest companies, in particular several that are well-known outside the People’s Republic. These include China Mobile Ltd. (NYSE: CHL), the world’s largest wireless company, PetroChina Co. Ltd. (NYSE: PTR), one of the world’s largest oil companies, PC giant Lenovo and financial behemoth China Life Insurance Co. Ltd. (NYSE: LFC). While none of these dominates the global market in which it operates, each has a huge footprint in the 1.3 billion resident country.

Primarily to blame for the poor performance of the Hang Seng is the impression that China’s modest drop in growth rate will blunt consumer spending inside the country. So far, there is no powerful evidence to back that. However, on another front, Chinese export rates have underperformed expectations, though only modestly. The manufacturing indices that measure China’s manufacturing output have shown mediocre results. But neither of these indicates any meaningful breakdown of the Chinese economic machine.

Ironically, the values of U.S. markets have surged despite fears that the economy here could slow from an already moderate pace. Stock prices have ignored that risk. This has triggered the belief among many investors that American markets cannot run any higher. But those suspicions have not been borne out.

The extreme contrasts between the lack of a rally in China and the presence of one in the United States cannot be explained by economic conditions. Ironically, a potential slowing of the GDP growth rate in the U.S. has caused worries about China stock values because of American imports of Chinese goods. For some reason, this has not done the same to American stocks.

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