Economists hope China’s continued growth (which contributed to nearly a quarter of all global economic growth in 2011) will help pull struggling EU countries out of the current economic crisis and save the U.S. from a potential double-dip recession.

But behind the decades-long boom in China, there are signs of fundamental market weakness that suggest a downturn could be just around the corner. Much like the U.S. in 2008, many Chinese banks are overleveraged and their debts are obscured by elaborately repackaged securities and other questionable financial products.

China’s unemployment is on the rise, especially among the middle class, and many local and municipal governments appear to be slipping into greater debt.

Many are comparing China’s real estate market to pre-recession conditions in the U.S. Easy credit has fuelled demand for commercial and residential housing and allowed new construction projects to crop up across the country, even in cases where demand for such development is scarce.

Chinese authorities have built entire “ghost towns” on speculation alone. While the empty cities feature finished apartment buildings and homes, paved roads and finished sidewalks, government office buildings, museums, and even theatres, they remain almost mostly uninhabited.

Combine these rapid-growth factors with cheap labour and land, and the result is a rate of inflation the government has been trying to cool. But economists fear the government’s efforts to slow growth could result in a too-rapid deflation of the real estate market. The results could be catastrophic, not only for the Chinese economy but for global markets as well.

China has been investing in Africa, including infrastructure development, land purchase and lease, and aid-for-resources projects. If China’s economy slumps, countries including Angola, Zambia, and Democratic Republic of Congo could suffer.

Dean Baker, co-director of the Center for Economic and Policy Research, joins the show to discuss China’s economy. Political economist Victor Shih also joins the discussion via Skype.

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