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Part of his reason for worry is that everyone is really bullish on China, ergo markets are setting up for trouble. To be fair, this isn't really the case. Lots of folks have called for a China crash, including Jim Chanos, but also plenty of others.
The reasoning is straightforward enough: Go-go growth, a monster real estate boom, and cheap credit do tend to create a nasty hangover, when mixed.
But before we see a "crash" (however that looks), we'll probably see a lot more of what we're seeing right now, which is the central planners trying feverishly, and ultimately in vain, to put out lots of tiny fires in the economy. A minimum wage hike there, limits on third mortgages here, some price controls to combat food inflation there, and so on. Because on balance, the government is keeping the accelerator pressed all the way (largely in the form of keeping its currency cheap), it's creating all kinds of micro problems, and of course that's essentially the flaw of any managed, centrally planned economy.
So before there's a crash, we'll see more tragedies of central planning, as the government seeks to have its cake and eat it too, applying more glue and tape to parts of the economy that are becoming undone.
Click here to see 17 facts about China that will blow your mind >
That's what to look for, and signs from late 2010 suggest this activity is already accelerating.
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