The sound of the Chinese bubble bursting?

James Fallows and Thomas Friedman, among others, have written a lot about how China needs to maintain a minimum economic growth rate, in order to keep its people happy, while at the same time ensuring growth by lending to its biggest customer--the United States. China now owns about 2.2 trillion dollars of US treasury notes that it simply cannot convert without causing chaos within its economy, and to the rest of the world. Well, this is a ground that has been well covered.

The new twist to this story, which maybe I missed before but I read for the first time now, is this:

[Don't] confuse fast growth with sustainable growth. Much of China's growth over the past decade has come from lending to the United States. The country suffers from real overcapacity. And now growth comes from borrowing -- and hundreds of billion-dollar decisions made on the fly don't inspire a lot of confidence. For example, a nearly completed, 13-story building in Shanghai collapsed in June due to the poor quality of its construction.

This growth will result in a huge pile of bad debt -- as forced lending is bad lending. The list of negative consequences is very long, but the bottom line is simple: There is no miracle in the Chinese miracle growth, and China will pay a price. The only question is when and how much.

Read the complete essay for how this argument is built up; pretty fascinating.