The IMF's China Card

Yet all the good news about China obscures an unavoidable problem. Nobody—but nobody—can keep growing at China's frenetic pace year after year without risking a major crisis. Evidence of financial bubbles abounds. The Chinese banking system, weighed down by years of state-directed lending to profitless government enterprises, is an accident waiting to happen. China supposedly invested more than 40 percent of its gross domestic product last year, and clever as the authorities may be, that money can't have all gone to sound, profitable projects. (If it did, growth would be even higher.) So the bad-loan problem must be getting bigger, not smaller.