The Chinese economy is a financial bubble that will inevitably pop, says Edward Chancellor, author of the classic text on financial manias, Devil Take the Hindmost. In a new report for GMO, the Boston-based money manager Mr. Chancellor lists 10 signs of a bubble in progress. They range from "blind faith in the competence of the authorities" to "a surge in corruption" to "inappropriately low interest rates."

He figures the Chinese economy meets all 10 of the criteria. And he has harsh words for some of the cheerleaders for China: "Wall Street ... tends to downplay the darker aspects of the Chinese demographic story," he writes.

"China's population is set to decline in 2015. The worker participation rate will peak this year. It's anticipated that the number of people joining the workforce will fall off quite rapidly. Yet it's this section of the population that tends to move to cities and has provided China with an apparently limitless supply of cheap labor."

Mr. Chancellor figures that if China's economy slows below Beijing's 8% growth target, calamity will ensue. Excess capacity will stifle new investment, the real estate bubble will burst and non-performing loans will bring down the banking system.

- Freelance business journalist Ian McGugan writes for the Financial Post.