Another day, another chorus of bubble warnings. Among the latest prophets of doom are James Rickards - probably best known as one-time chief legal officer for Long Term Capital Management, the all-star hedge fund that went spectacularly bust in 1998 - and Takatoshi Ito - a former vice-minister for finance in Japan. These then, you might think, are two people who ought to know a thing or two about unsustainable bubbles. Speaking at an asset management conference in Hong Kong yesterday, Rickards described China as 'the greatest bubble in history'. Meanwhile, writing in the Financial Times newspaper, Ito warned that China is in danger of replicating Japan's bubble economy of the 1980s. 'What is happening in China now is familiar to any Japanese aged above 45,' he argued. In issuing their warnings, Rickards and Ito join a growing crowd of commentators led by New York short-seller James Chanos and former IMF chief economist Kenneth Rogoff who have recently sounded the alarm about overheating in China. So far this week The Christian Science Monitor has called China a 'superbubble'. The Times of Oman has run an article about the 'frenzy' in China's property market. Zambia's Post newspaper has asked 'When will China pop?' And a headline in Fortune magazine has screamed 'China's garlic bubble hits US'. To judge from the hysterical tone of this coverage you could be forgiven for concluding that the Chinese economy must be dangerously overheated and in imminent danger of a catastrophic collapse. Except that if you look for signs of a general overheating, they are surprisingly hard to find. Certainly China's stock market is not in a bubble. As the first chart below shows, the Shanghai Composite Index has fallen by almost 10 per cent over the past four months and the trend is firmly downward. Priced at around 18 times forecast earnings for this year, the market is actually looking quite cheap compared with its four-year average valuation of 21 times forward earnings. Nor, according to official figures, is the property market in a bubble. The government says home prices have risen by 10.7 per cent over the last year. That's a significant increase, but as the second chart below shows, prices are only moderately above their long-term trend. What's more, as Mark Williams of independent research house Capital Economics points out, at that rate of increase, home prices are rising less quickly than incomes, which means housing is becoming more, not less, affordable; the opposite of what happens in a bubble. Of course, there are plenty who doubt the accuracy of the official figures. And there are certainly local pockets of severe property market overheating, with state-owned enterprises, flush with credit after last year's bank lending binge, paying crazy prices at local government land auctions. There is no doubt these excesses will cause headaches in the future. Many of last year's loans will turn bad, which will weaken the banking system, delay financial reform, and possibly necessitate another state bailout. But localised bubbles in the office, retail and luxury housing sectors are not about to bring the whole edifice of China's economy crashing down in ruins. A major surge in inflation might just do that. But as the third chart below shows, recent price rises have been modest by historical standards. Sure, the increase in the consumer inflation rate to 2.7 per cent in February was worrying, but much of the up-tick was driven by seasonal rises in food prices ahead of the Lunar New Year holiday. With productivity improvements holding down unit labour costs despite recent wage rises, much of China's manufacturing industry plagued by overcapacity, and government officials from Premier Wen Jiabao downwards doing their utmost to contain inflation expectations, the chance of runaway price rises looks slim. Most economists now expect the consumer inflation rate to peak somewhere below 5 per cent in the second half of the year. As a result, it is hard to conclude that the Chinese economy is in much greater danger of imminent collapse now than at any other point in time over the past 10 years. There are certainly frothy areas in the property market, and a big increase in bad loan ratios looks inevitable, but that doesn't mean that the whole economy is one big bubble just waiting to be burst.