Contrarian investor James Chanos — who foresaw the collapse of Enron — is warning that China's booming economy is headed for a crash. Most economists are predicting China to continue growing at a quick pace this year, partly thanks to a $586 billion stimulus package. But Chanos, whose hedge fund has made a fortune betting that high-flying companies would soon fall, says that with its overstimulated real estate market and oceans of speculative capital, China looks like "Dubai times 1,000 — or worse." He even suspects that Beijing is cooking the books to fake its impressive economic growth rates. Is he right that China is about to go bust? (Watch James Chanos discuss China's economic future)

China could implode like a gigantic dot-com: The consensus seems to be that China is run by "omnipotent geniuses," says William Pesek in BusinessWeek, and that it can grow by 10 percent a year indefinitely. But that's what they said about Japan in the 1980s, until it crashed, and it's what they said about the New Economy until the dot-com bust. If China's stimulus overspending doesn't magically turn it's "rabid savers" into big spenders, and make other countries buy more of its exports, get ready for the implosion of ""
"Short sellers home in on China's balance sheet"

Chanos is wrong — there's no bubble in China: Chanos "clearly doesn't understand the economic system he's talking about," says Shaun Rein in Forbes. China's booming real estate market won't collapse like the one in the U.S., because China "doesn't have the reckless consumer behavior" we saw in the U.S. — everybody has to put 30 percent down and house flippers are heavily taxed. As another famous investor — James Rogers, who co-founded Quantum Fund with George Soros — says, betting against China is a big mistake.
"Jim Chanos is wrong: There is no China bubble"

Even the Chinese government sees the danger: With property prices in some cities doubling in less than four years, says Steven Mufson in The Washington Post, many investors think "the usual bubble warning signs are flashing." The Chinese government sees them, too, and on Sunday vowed to monitor investments by overseas speculators to keep them from overinflating home prices. Rising family incomes and mass migration to cities could prevent a meltdown, but, "with China acting as a key engine of global growth," if the Chinese real-estate bubble does burst it "could be a pop heard round the world."
"In China, fear of a real estate bubble"