A search on Google for China bubble brings about 434,000 replies. A search for China boom brings 832,000 or almost double. Every day there's more and more written about the China economic miracle. Every multinational worthy of the name has a China strategy. But there's a problem. It is not sustainable. Indeed it's all a house of cards destined to fall.

This week's Economist has a survey on business in China. It is great reading for anyone interested in what's really going on in China. Unfortunately not even the Communists have found a way to beat the laws of economics. Some select quotes follow:

China's real problem, however, is not inflation but overinvestment...Easy credit is producing massive overcapacity, leading to deflation, more bad debts and fewer new jobs. Already, nine-tenths of manufactured goods are in oversupply, yet investment in fixed assets last year grew by 30% and contributed 47% of GDP. But the biggest concern is that China's growth is staggeringly wasteful. Whereas in the 1980s and 90s it took $2-3 of new investment to produce $1 of additional growth, now it needs more than $4.

But as in imperial times, the country's scale can prove more of a hurdle than an opportunity. China has 31 provinces, 656 cities, 48,000 districts, seven major dialects and 80 spoken tongues. Climate and geography vary from the freezing northern plateaus to the semi-tropical south. There are enormous disparities in income, education and lifestyle between city dwellers and farmers, and between the wealthy east coast and the poor west and north-east. For most products, there is no such thing as a national market. China's consumers are too dispersed, too inaccessible and too different from each other.

Yet as Tex Gunning, president of Unilever Bestfoods Asia, says: “Foreigners still think they can tackle China in one go, when they would never start in 17 countries in Europe at once.”

The problem in the world today is too much liquidity is chasing anything that might have a chance of returning a quick profit. But there's no such thing as easy money; at the end of the day returns have to bear some relationship to risk and prices have to bear some relationship to returns. Stocks are off their highs and rich. Property's bubble is bursting. The expansion of debt is coming to an end despite still low interest rates in many countries. While China is growing at a furious pace it cannot carry the world's growth hopes indefinitely. Especially when it cannot carry on long as it is, and especially when it is still only the world's 6th largest economy. Countries such as Japan and Germany continue to bumble along. I don't think it will end in a crash, but I do think it will end. And when it does that's when the opportunities will arise.

There's plenty more and I strongly recommend reading it all to anyone interested in China and the current bubble. It's worth the price of subscribing on its own, let alone the year's worth of good reason you get thrown in.