I am extremely worried about the Chinese stock markets. The growth in the value of the Chinese stocks has been explosive and never seems to back down. For the last few months, I haven't seen any fundamentals supporting such growth in the Chinese stocks other than pure speculation - speculation that China would introduce some sort of stimulus to offset any weak economic performance.
My guess is that part of the appreciation in Chinese stocks is because the market is young - meaning, there would probably be many newcomers to the Chinese stock market. And those newcomers, per my guess, are chasing the stocks. Is there a bubble forming in Chinese stocks? I think so. And probably it is a good time to get out. But with China's massive forex reserves, they so far have always beat any fundamental logic that would call for a correction in the Chinese stock prices.
One of the best ways to prevent any massive bubbles in the stock market and to allow for a gradual market correction is for China to allow more appreciation of its currency. The sooner they do it, the better are the chances of preventing China from becoming another Japan. Normally, the story has been that China intervenes in the currency markets to keep its currency devalued. But recently that might have not been the case and instead the dollar's strength and europe's QE might have been the reasons for yuan's weakness more so than China's intervention in the currency markets itself. If so, China's intervention might be needed again- but this time not to weaken the yuan but to strengthen it by selling dollars in the open market. If that is done, it would be beneficial to both the US and China and in fact the world economy as a whole as that would adjust the imbalances to an extent that we are starting to see in the world economy today.
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