The cartoon character running off the edge of the cliff makes a useful metaphor for the psychology of overvalued markets. As long as Wile E. Coyote does not realize there is no ground beneath his feet, he can keep running in midair. When he looks down, he plummets.
Although the world of physical matter does not behave this way, financial markets sometimes do, and it could be a helpful lens through which to view the situation confronting China.
For the past 18 months, Chinese authorities have been trying to reduce property prices, leverage and the economy’s dependence on the real-estate industry.