Apparently, “there are nine million bicycles in Beijing”. Middle-aged, middle- class fans of middle-of-the- road music will have already been apprised of this fact by Georgian/ Northern-Irish chanteuse and Radio 2 favourite Katie Melua (pictured, right), in her 2005 hit song of the same informative name
(I like to think that I only had a two-thirds chance of knowing that).

In an odd coincidence, there are also 9m copies of Ms Melua’s first two albums in circulation in the US and Europe, suggesting that consumers in mature economies have as much need for tedium as the Chinese do for personal transportation.

But, if an even nerdier singer-songwriter were composing today, she (or he) would arguably update the lyric to: “There are three million more sharedealing accounts in Beijing, and other major Chinese conurbations, than there were a month ago.” Admittedly, it doesn’t trip off the tongue quite so easily, but it is equally factually correct, and – I would argue – a lot more interesting.

According to China’s payment clearing house, another 484,799 dealing accounts were opened by private investors last week alone, on top of the 2.4m accounts opened in the four weeks to August 7. On July 29, these new traders helped push the daily value of transactions on Chinese stock exchanges up to $63bn – which Bloomberg noted was more than the $58bn dealt on the markets of New York, London and Tokyo put together.

Observing this activity, Edward Chancellor, of investment firm GMO, said: “There’s absolutely clear evidence of a speculative mania having returned to the stock market.” Jim O’Neill, chief economist of Goldman Sachs, warned that he “wouldn’t be surprised by a correction”.

That correction duly came on Monday, when the Shanghai Composite fell 5.8 per cent. However, it’s the economic fundamentals – rather than the company fundamentals – driving the speculation that investors ought to focus on. In the FT’s market report, the sell-off was attributed to concern over the Chinese government’s efforts to rein in a credit boom that has seen cheap borrowing “diverted to the country’s stock and property markets”. Sound familiar?

Fund manager Stewart Cowley, of Old Mutual Asset Management, was singing from the same hymn-sheet earlier this week. In his view, “debt-fuelled consumerism” is getting out of hand. He points out that consumer lending in China has hit $1,400bn – already $1,000 per person given a population approaching
1.4bn – and, worryingly, the number of non-performing loans is increasing. If bad debts worsen, he suggests the prices of Chinese goods would have to fall if manufacturers were to make any kind of margin – with the result that China will “export deflation around the world.”

Such a deflationary contagion would appear to make global bond funds, such as Cowley’s, more attractive than emerging market equities.

But fund manager Teera Chanpongsang, of Fidelity, has been humming a different refrain. Although based in Hong Kong, he is focused on an economy that is not an exporter of deflation – or much else. On a long-distance call earlier this week, he argued: “One of the key drivers of China is that it relies a lot on export. But India is a more domestic economy – 65 per cent is domestic consumption.”

And in India, the millions of bicycles – or, more importantly, cars – are heading in the right direction. Total retail sales are forecast to grow from $150bn in 1999 to $450bn by 2015, but car ownership penetration is only 1 per cent and set to rise rapidly. Similarly, there were only 4m mobile phones in India in 2000 – there will be an estimated 743m by 2015.

Crucially, though, credit card penetration is only 2 per cent. So this is not a consumer boom built on plastic. It’s built on economic growth of between 5.1 and 9.8 per cent in the past six years.

Equity valuations have already risen in response. Chanpongsang admits they have reached “mid-cycle levels” following this year’s rally. However, this has been accompanied by an upward revision in corporate earnings forecasts. As a result, Indian shares trade on a forward price/earnings
ratio of 16, compared with 12.2 in China – but earnings per share (EPS) growth in India is forecast to rise from 3.4 per cent to 21.4 per cent in 2011, while in China it’s going backwards: from 32.7 per cent to 15.3 per cent.

Who will keep this growth going? Look at the demographics: India’s middle class represented
22 per cent of the population in 2002, but it is now approaching 34 per cent and rising. When they start buying Katie Melua CDs, the story will be complete. Now, where did I put my guitar?

matthew.vincent@ft.com