Chinese stocks have gained more than 50% this year and will keep gaining as the world braces for a strong global recovery.
But the broader economy has been hobbled by a lack of investment and a weakening currency.
The Shanghai Composite Index of stocks rose by 1.2% Thursday after hitting a record high in early April.
China has been the world’s largest trading nation since its market opened in 1997 and the world has been watching closely to see if Beijing can regain its footing as a global financial center.
The stock market in China is expected to hit record levels in 2020.
The Dow Jones Industrial Average rose more than 2% on Thursday, but the S&P 500 rose by 0.3%.
The Shanghai Composite closed higher at 4,834.52.
The S&P 500 finished up 0.1%.
In China, a market-based index, or S&p 500, rose by 7.4% Thursday, while the Dow Jones industrial average gained 8.9%.
Analysts say China has struggled to attract new investors amid concerns over rising debt levels and its record financial mismanagement.
“Investors are coming to the realization that the Chinese economy is not strong enough,” said David Yee, an analyst at Morningstar.
A slowdown in emerging markets has led to a slowdown in Chinese growth, according to a survey by the U.S.-based consulting firm IHS Global Insight.
China is one of the biggest buyers of commodities in emerging countries.
China’s economy has shrunk by 3.2 percentage points since April, according, to the International Monetary Fund.
In the U-shaped global economy, a drop in exports can lead to a contraction in demand for goods and services, which in turn can lower inflation.
With the U,S.
and European economies still in recession, it will be very challenging for Chinese companies to re-enter the global market, said Andrew Hsieh, chief market strategist at Credit Suisse.
At the same time, China’s stock market is still trading at levels that are still above the levels where a recovery was likely, Hsiep said.
It’s a great risk, said Brian Loomis, chief economist at TD Securities.
He said the Shanghai Composite may be a proxy for the rest of the world.
“I think the S-curve, the big S-shaped bear market that is currently on the horizon, is a very important proxy for all of this,” Loomi said.