Bubbles come in different shapes and forms, but it is striking how often they are the byproduct of attempts to make difficult economic transitions. This was true of the US stock market in the late 1920s as Americans stumbled towards the hegemonic global role previously played by the British.

It was true of the property and equity markets in Japan in the 1980s, when an export-led growth model that had worked well in the catch-up phase ceased to be viable in a country that had turned into an economic giant. So, too, with China today, where first a property bubble and now an incipient stock market bubble have a great deal to do with imbalances in an economy that needs to shift from investment-led growth to increased consumption.

Such transitions are difficult because of the clash of vested interests. Chinese local government officials have been big beneficiaries of easy financing of infrastructure investment and the accompanying land grab. State-owned enterprises have lived handsomely off the same gravy train. At every level of the public sector there are people for whom the status quo is a cornucopia. Equally to the point, liberalisation, which is the key to an effective transition, can only erode the power of the communist party.