NEW YORK (Fortune) -- World-renowned short seller Jim Chanos -- the hedge fund manager who called the fall of Enron and the systemic problems cause by subprime mortgages --recently turned his gimlet eye on China. He saw a country whose rapid rise was hiding massive flaws: grossly inflated real estate prices, irresponsible construction lending, massive overbuilding, a banking system larded with bad loans, and unreliable government data. Fitch Ratings weighed in this week saying that China's banks face the greatest "bubble risk" of any Asian country.

If Chanos and his fellow Cassandras are right and there's a bubble waiting to burst, investors might be surprised: The results won't be anything like the ones we've seen in the U.S. and Europe. In fact, a China...