On July 19, little more than a month ago, the Dow Jones Industrial Average closed above 14,000. On Friday, it closed at 13,079, down more than 6.5% from the peak. Major equity indexes around the world have followed a similar downward pattern, with one major exception: China.

The Shanghai Composite Index is up 19% since July 19, while the Shenzhen Composite Index is up 19.9%. Both indexes have given ground in the past few days after reaching record highs earlier last week.

They may continue to shed value in the coming days, but both indexes are up dramatically for the year. The Shanghai index is up 71% this year, and the Shenzhen index is up an astounding 131%. In contrast, the Dow is up less than 4.9%, and the S&P 500 is up less than 2.1%.

China’s equity markets over the past 17 years have done remarkably better than the rest of the world. A 100,000 yuan investment in the Shanghai index at its founding in 1990 would be worth 4.6 million yuan today, or a better than 25% compounded annual rate of return. An identical investment in the Shenzhen index at its founding in 1991 would be worth 1.3 million yuan today, or a better than 17% compounded annual return. Given the yuan’s appreciation relative to the dollar, these rates of return understate the dollar equivalent. Over the same period, the Dow and the S&P 500 have returned approximately 9% compounded annually.

Most financial markets worldwide are closely interrelated. Why did China’s equity markets remain strong even after the worldwide decline of the past month? No one has a good answer.

China’s recent strength in August is not a regional phenomenon. Equity markets in Hong Kong, Taiwan, Japan, South Korea, Singapore, the Philippines, Malaysia, and other parts of Asia began falling in July, most more precipitously than American markets.

Nor are China’s equities a safe harbor of lower risk. To the contrary, investment in Chinese equities has taken intestinal fortitude. Volatile swings of more than 1% daily are common. China’s equity indexes may well fall as rapidly as they have risen. Nor have China’s equities benefited from abnormally favorable exchange rates in recent weeks. The dollar-yuan exchange rate has been stable.

Nor is the explanation in the unique character of Chinese firms or assets. Many Chinese firms are listed in Hong Kong, where the stock market has been weak over the past month. Many international firms, including American firms, have substantial investments in China. Firms with investments in China do not appear to have fared systematically better than other firms.

The Chinese exchanges have seen slumps: A sharp readjustment in 1997 and then a protracted slowing between 2001 and 2004 resulted in a one-year prohibition on new IPOs. But for 2006–07, the Chinese equity markets have been on a sharp upward trend.

Part of the explanation may reflect the relative isolation of investors in China’s exchanges. Opportunities for Chinese investors to invest in foreign securities are limited. Most investment in China’s stock markets is limited to domestic investors; foreign investment is limited to qualified foreign investment institutions that collectively are limited to $10 billion in investments — a tiny share of the nearly $3 trillion in market capitalization for Shanghai and Shenzhen combined. Still, when the prospects decline for international firms that buy and sell with China and invest in China, there reasonably should be a spillover effect on China’s stock exchange.

So why have prices in China’s equity markets remained high? That is exactly the question the Chinese government asked repeatedly over the past 14 months. During that time, the government has raised the amount of deposits that lenders must hold in reserve several times. The most recent increase took effect August 15, perhaps not coincidentally a day that Chinese equity markets fell. Prior increases in the reserve requirements, although temporarily halting the market ebullience, have eventually given way to increased market prices. Nor have three increases in interest rates this year dampened equity market demand.

Beijing hosts the Olympic Games next summer. The real marvels will not be the human athletes but the financial miracles: a phoenix economy risen from decades of death and — unless a bubble bursts — stock markets that defy gravity.

A former FCC commissioner, Mr. Furchtgott-Roth is president of Furchtgott-Roth Economic Enterprises. He can be reached at hfr@furchtgott-roth.com.