Picture I have is ... credit and business cycle slows ... provinces, state-owned enterprises, anyone whose business needs credit pressures banks for more loans... banks try to stuff all their bad loans into 'wealth-management products' so retail investors are the ones stuck holding the bag when they go bad... government cracks down...which stresses the banks.

When an economy slows, there are a lot of accelerator effects, inventory and investment growth doesn't slow, it reverses... that's why we have recessions. Very hard to just slow from 10% to 6% without overshooting.

Hard to buy stocks... for instance, the big banks (which are about as legit as you can get, never mind the shenanigans in smaller companies, Sino-Forest etc.)... The numbers are fictitious, the government owns 70%, any number of shares give you no ability to influence management or effect change.

So what are you buying? Maybe, one fine day, a real stock reflecting real ownership in a growth market. And today, a 5.7% dividend. Absurd when you think about it, in a growth market they have an increasing capital requirement and should be reinvesting, not paying big dividends. And you're buying the idea it would cost the Chinese government too much face to cut a dividend or dilute shareholders, even when the s*** inevitably hits the fan and there's a bank bailout. Caveat emptor.

http://www.ft.com/cms/s/0/ae5d1d8c-e26f-11e2-87ec-00144feabdc0.html
http://www.economist.com/blogs/freeexchange/2013/07/chinese-credit