The big plunge in Shanghai’s stock market — and New York’s — is a reminder, and none too soon, that accidents waiting to happen don’t wait forever. For a long time, communist Chinese stocks went up and up. On Tuesday, the Shanghai Composite Index was quoted above 3,000. Two summers ago, it stood at but 1,000. Even after plunging 9% yesterday, the Chinese market is still valued as if for a state of earthly perfection.

No such conditions prevail in the mainland, however, not in politics and not in finance. That the value of the Chinese scrip is under Beijing’s thumb is old news. That capital controls distort the values of Chinese businesses, to the detriment not only of China’s investors but also of New York’s, is a story less familiar but every bit as timely.

One would suppose that identical stocks listed in Shanghai and Hong Kong would fetch more or less the same prices. Well, welcome to the rabbit hole that separates the communist and free worlds. Owing to official restrictions on the movement of money through what used to be called the Bamboo Curtain, the same company can be quoted high in Shanghai and low in Hong Kong.

The China Life Insurance Co., which commands no less than 50% of the mainland’s insurance market, is one such company. Its shares trade in Hong Kong. Economically identical shares trade in Shanghai. The Shanghai listing dates only from early January. As the mainland’s market was then white hot, the China Life stock came roaring out of the blocks on the day of its initial public offering. The price instantly doubled. What did not double was the corresponding Hong Kong price.

All at once, the Shanghai-listed China Life shares were appraised as 83% more valuable than the Hong Kong-listed stock. To repeat, the same stock. On the mainland, China Life commanded the kind of valuation once assigned to high-flying technology issues — 50 times earnings and seven times net worth, a.k.a. “book value.” For perspective, American International Group, which was founded in Shanghai in 1919 and does a fair business on the mainland, traded at the same instant at 14 times earnings and less than two times book value.

Now in a capitalistic system, stupendous and insupportable divergences in value do sometimes pop up. But they usually don’t persist. Profit-seeking investors buy the cheap asset and sell the rich one. This activity — the fine art of arbitrage — is, however, stymied when governments block the free movement of capital. So the communist mandarins in the Great Hall of the People bears a certain share of the blame for yesterday’s rout in the Dow.

But if the waxy remains of Mao Tsetung cracked a cadaverous smile yesterday, it was because a share of the blame may also be assigned to the excesses of American mortgage finance. Not a little of the brimstone bubbling up from the New York Stock Exchange yesterday had its source in the nutty lending practices of the recent house-price boom. Time was when the borrower had to apply for a loan; at its wildest in 2006, one almost had to apply oneself to avoid getting one.

Nor should an aggrieved investor forget to shake a fist at the Federal Reserve, which muscled down its interest rate to 1% between 2003 and 2004, ostensibly to fight “deflation,” though the dollar was still being inflated. Now everyday low — and lower — prices may or may not have presented a threat to this republic during the late Greenspan era. We can think of worse economic scourges. But it’s hard to gainsay that the medicine to fight this supposed sickness helped to set off a frenzy of lending and borrowing by individuals and corporations alike.

Finally, bruised and battered investors might pause to look in the mirror. Manic booms, and sickening busts, came into the world long before central banks, let alone the Chinese Communist Party. We humans are an excitable and suggestible lot, all too prone to be bullish at the top of the market and bearish at the bottom. Yesterday’s shocking drop in the Dow may or may not prove to be the bottom of this liquidation. But the market to which we New Yorkers are waking up this morning is a more value-laden, therefore a safer and more welcoming one than that from which we averted our eyes at yesterday’s closing bell.