Singapore, which I'm visiting at the moment, opens your mind to the highly improbable. Rich, ethnically diverse, cheerfully efficient, globalized in the extreme, it's a man-made economic miracle -- astonishing proof of what market forces combined with superb top-down direction can achieve.

Even in Singapore, though, there are limits to what you can believe. I struggle to imagine, for instance, that China's stock market isn't a bubble.

China's leadership has long been impressed with the Singapore model. Since Deng Xiaoping, its government has been much more interested in capitalism in the style of Lee Kuan Yew than class struggle in the style of Karl Marx. In China, the mix of markets and smart management has indisputably worked another miracle, and on a vastly larger scale than Lee's.

It's a record that can make investors credulous. Lately, the government has defied predictions of an economic hard landing: The economy has slowed, but hasn't crashed. Beijing wanted a gentle slowdown -- part of its effort to re-balance the economy toward consumption and away from exports and investment -- so it pulled some fiscal and monetary levers and that's what happened. Targeted growth of 7 percent in gross domestic product this year, fast by any other country's standards, looks achievable.

QuickTakeChina's Pain Points

Many investors seem to think officials can direct the stock market just as precisely. It's only a matter of time before they're proved wrong.

You could argue, in fact, that they already have been. The government wants a strong stock market for several reasons, including to support demand as property prices sag and growth in credit and investment slow. It has been talking up share prices. Official news outlets extoll the virtues of stock ownership. But the government surely can't have wanted the frenzy that in recent months has pushed the valuations of many companies to preposterous levels. Manic episodes rarely end well -- and in many respects, this is mania.

The Shenzhen market is up almost 200 percent over the past year. Its price-earnings ratio stands at a little less than 80. (Standard & Poor's 500 Index is up 9 percent and has a ratio of 19.) Much of the demand for Chinese shares is credit-fuelled and comes from small investors new to the game. In one week in April, according to The Economist, Chinese investors opened 4 million new brokerage accounts-- and, by the way, two-thirds of the country's newcomers to investing left school before the age of 15.

Technology stocks, heavily represented in the Shenzhen index, are especially in demand. (Tech stocks: What could possibly go wrong?) The price of China's highest-flying stock, Beijing Baofeng Technology Co., increased 4,200 percent in the 55 trading days after it went public; on Friday it was valued at 715 times reported earnings. Alibaba's valuation of 55 times earnings looks cowardly by comparison. Companies change their names and rebrand themselves as technology firms -- then watch their valuations soar.

All this as the economy slows down. If it isn't a bubble, I don't know what is.

The more it inflates, the greater the damage when it bursts. Granted, by rich-country standards, China's stock markets are still small in relation to the wider economy. The direct wealth effects of a big drop in share prices therefore won't be as big as in, say, the U.S. But the indirect effects are dangerously unpredictable. The fact that a lot of shares have been bought with borrowed money will worsen the impact on many households and put lenders at risk as well.

The blow to confidence will be all the greater because the government has acted so conspicuously as a market cheerleader. That's why the bursting of the stock-market bubble could conceivably deflate the myth that what Beijing commands of the economy shall be so. And who knows where that might lead.