Look Inside

Yet more evidence for my contention that domestic Chinese politics are going to be pretty rocky in the near future:

The fragile banking sector is not the only problem that ought to give Chinese leaders sleepless nights. There are also the country's stock markets.

The days are long gone when the rising markets of Shanghai and Shenzhen threatened to eclipse Hong Kong as the listing location of choice for the best Chinese companies. Although a handful of locally listed companies have prospered, the markets as a whole have fallen since 2000. Last year, the Shanghai composite index dropped 15 per cent, making it one of the world's worst performers in spite of Chinese economic growth of 10 per cent.

A financial crisis in China is certainly possible. Of course, it's not unknown for crappy domestic politics to make leaders engage in overseas adventures (cough cough Bush cough) so this might make things even more tense in the South China Sea.