China is either "a giant Parmalat," as one of Fat Dragon's witty Italian friends said recently, a reference to the Italian dairy company that recently collapsed under a mound of faked profits and huge debt.
Or it is on a march to become the world's sole superpower, surpassing even the United States, a scenario based on the ever-dodgy assumption that today's 9% growth will continue forever after in a straight line upwards.
Fat Dragon remains bullish long-term about China, but likewise, does not expect it to grow without some very big bumps in the next few years. In fact, we are probably in the midst of one now. I say probably, because it is often hard to know in China until you are a few months in.
Still, there are a multitude of warnings that the government's credit crunch, plus the mostly unrelated tanking of the domestic 'A' share market in recent months, could leave a lot of blood on the floor. Already, D'Long, the company which until recently had the largest single private holdings on China's equity markets, has all but closed it doors. The three Tang brothers who ran it have disappeared and the company is about to be carved up.
Another casualty of the slowdown is Topsoft, a software company in Sichuan, whose president recently fled overseas with a large amount of money, according to the Chinese press.
In such cases, the listed subsidiary of a parent company was used as a guarantor for loans to the parent. The parent defaults and the listed company has to recognise the losses, leaving the minority shareholders carrying the can.
Fat Dragon thinks there are probably many other such cases to come to light. Many companies, especially private groups, even in places like Shanghai, where the business climate is relatively healthy and transparent, have been struggling to get loans in recent months.
When you are highly leveraged, this is a big problem, and doubly so when you are in the property business at a time when prices are falling, or at the very best, static.
Some of these companies are in the category of too big, or too well-connected, to fail. But equally, there is not a bail-out fund sitting there – apart from the prospect of more bank loans – to keep them afloat forever.
It's no wonder that Shanghai has been kicking up such a huge fuss over the credit squeeze. And perhaps no coincidence that all the signs from Beijing are that it is about to be eased.