The booming Chinese stock exchanges could see their lengthy rally come to an abrupt halt by events such as a slowdown in exports and profits, the OECD warned in its twice-yearly “Economic Outlook” report.

“High share prices pose a risk to stability,” the OECD said. “The existing level of share prices appears to carry the risk of a marked correction should it appear that the current growth of profits cannot be maintained.” Such a situation might arise in the context of slower export growth stemming from a downturn in world trade, the OECD argued, adding that in that event, it could be hard to limit the consequences to the stock markets only.

“There are some reports that individuals are funding their growing purchases of shares through bank borrowing,” it said.

“While the portion of the stock market wealth held by individuals is small, such loans could turn sour if there were a fall in prices, thereby adversely impacting bank balance sheets.”

Chinese stocks have jumped about 55 percent since the beginning of this year and more than tripled since the start of 2006 as warnings at home and abroad have accumulated that the situation cannot go on for much longer.

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