The Chinese stock market mania is a textbook case of a financial bubble. Place the chart of NASDAQ over the chart of the Chinese index, and it is hard to tell the two markets apart. A more apt analogy, however, is the case of Japan. At the end of the 1980s, Japanese banks and telecommunications companies headed the list of the most valuable companies. Today, the same list is led by Chinese banking, insurance, telecoms and airlines. China now accounts for four of the world's top 10 companies -- China Life, China Mobile, China Petroleum and Industrial and Commercial Bank of China (ICBC). In July, China's largest bank, the Industrial and Commercial Bank, overtook Citigroup for the title of the world's largest bank, as measured by market capitalization. With all of Citigroup's subprime woes, ICBC's market cap is more than twice Citigroup's $152 billion. China Life, the world's largest life insurer by market value, is worth more than any of the largest North American insurers. China Mobile is the largest telecommunications company in the world with a $330 billion market capitalization. U.S. champ AT&T weighs in at $220 billion. Air China is worth more than any of its larger and more respected Asian rivals.
Every bull market has its iconic moment -- the colorful story that signals the top of the market. For the Japanese, the moment was when in the late 1980s, all of the land under the Royal Palace in Tokyo was worth more than all of the land in California -- or Canada. China's moment may have been the listing of PetroChina on the Shanghai stock exchange on Nov. 5. By the end of the first day of trading in Shanghai, PetroChina's market cap exceeded $1 trillion -- more than that of Exxon Mobil and General Electric combined, the second and third-biggest companies in the world. This, despite the fact that PetroChina's earnings stood at about half of Exxon Mobil's. PetroChina's valuation also pushed China's stock market into the third spot among global markets to surpass the U.K.'s FTSE and only trail the United States and Japan. Put another way, the value of this single Chinese oil producer alone was almost as big as the entire Russian stock market -- and more than the annual GDP of economic rival India. Despite this, Chinese investors were clamoring for shares of PetroChina just weeks after U.S. billionaire Warren Buffett sold his stake in the company.