China risks crisis if Beijing cannot control credit growth

It's the time of year when bank and brokerage company analysts publish weighty reports setting out their forecasts for the region's economies.

Perhaps because the short term outlook is so uncertain, this year a good many are focusing on how Asian economies, and China especially, are likely to develop in the long run, over the next decade or two. Few doubt that China's rapid ascent will continue, transforming the global economic landscape.

Analysts at Morgan Stanley, for example, expect a 'megatransition' which will see China's gross domestic product quadruple in US dollar terms by 2020, with the economy rebalancing to enter 'a golden age for consumption'.

Meanwhile, the economic research team at Standard Chartered believe the world is entering a 'super-cycle' driven largely by China's fast growth. They predict that China will overtake the United States by 2021, and that by 2030 China's economy will be twice the size of America's.

It's a compelling story, and one that international investors are eager to buy into.

Yet although many investors have been won over by the China story, some are haunted by a nagging doubt. They recall how similarly compelling investment stories in the past - Southeast Asia in the mid 1990s, the internet in the late 1990s - turned out to be fiction. Now they worry that China's economic boom could turn into bust, inflicting punishing losses on anyone unfortunate to be invested in the market at the time.