The benchmark Shanghai Composite Index plummeted 4.47 percent to 1,986 points on heavy selling pressure on September 16, when the news came that two American investment banking giants were either going to declare bankruptcy or be bought by other financial firms.

Many market observers said the mainland stock markets overreacted to the U.S. financial crisis.

The banking sector suffered the biggest losses in terms of market value. Share prices dropped nearly 20 percent in two trading days. ICBC, which held the highest value of Lehman Brothers' bonds among all Chinese banks, was hit the hardest. Its share price dropped to 3.81 yuan ($0.557) on September 18 from 4.73 yuan ($0.692) on September 12.

Several analysts believed that the central bank's decision to cut its loan interest rate but maintain the current deposit interest rate will further squeeze banks' profits.

More U.S. Treasury Bonds

China remained the second largest holder of U.S. Treasury bonds at the end of July. It bought $14.9 billion worth of U.S. Treasury bonds in July alone, showing the country's optimism about the greenback and the U.S. economy.

The latest Treasury International Capital report issued by the U.S. Treasury Department indicated that China held $51.87 billion worth of U.S. securities as of the end of July. Japan topped the list of bondholders with $59.34 billion, while Great Britain ranked the third with $290.8 billion.

The three largest holders all bought more U.S. Treasury bonds in July, when international crude oil prices fell, and the U.S. dollar showed signs of a recovery after nearly a yearlong depreciation against other major currencies.

Less Prosperous Property

China's property price growth rate slowed down in August year on year, and home prices dropped compared with those of July. It was the first monthly decrease since 2006.

Property prices in 70 major Chinese cities rose 5.3 percent year on year in August, but dropped 0.1 percent from July, according to a joint statement from the National Development and Reform Commission and National Bureau of Statistics. Housing prices in Haikou, Yinchuan and Beijing recorded the biggest growth in August, up 16.5 percent, 12.4 percent and 11.7 percent, respectively.

The continuing U.S. subprime crisis, stemming from unpaid mortgages, sparked concern in the Chinese property market. Property developers in some cities are worried about a post-Olympic recession in the housing sector. They are offering discounts to potential buyers, but large-scale price cuts were strongly resisted by those who bought homes at higher prices earlier this year.

The Chinese central bank cut its loan interest rate in a bid to avoid a possible economic slowdown. Economists saw this as boost for the property industry.

GE Looking for More

China remains a hot destination for foreign investments amid the global economic slowdown. General Electric Co. (GE) said it would expand its presence in China by setting up five more regional headquarters in the country.

Chen Xiangli, President of the China Technology Center under the U.S. conglomerate, said at a press conference that the decision was in line with GE's new strategy of making China its second hometown.

GE now has two regional headquarters in the country in Shanghai and Beijing. The other five offices will be located in Shenyang, Wuhan, Chengdu, Xi'an and Guangzhou.

Last year, GE invested $15 million in a research center in China and added $40 million more this year to fund the research and development of new technologies and products, including wind and solar power, clean coal, sewage treatment, seawater desalination and hybrid trains.

Chen said GE would strive to tap into the potential of the Chinese market. In 2007, GE's sales revenue on the Chinese mainland accounted for only 2.54 percent of the company's global turnover.