Fortune recently did a story on Jim Chanos called "Chanos vs. China" which warrants reading. Below is the associated video in which you can hear Chanos making the bearish case for China.
Chanos is the most unapologetic and aggressive of the well-known bears about his case. For example, Andy Xie seems to have backpedalled somewhat on his bearish view (see here in his debate with Shaun Rein and here again). Hugh Hendry, who you can see here in China in front of empty flats and high rises, is only betting on China tangentially via Japan and CDS. Chanos, on the other hand, is taking direct bets on Chinese shares involved in the infrastructure boom and associated international sectors like building materials.
What does that mean for the real economy in China and globally? In January of this past year, Chanos said "I would be very leery of any companies that are exporting raw materials into China to build up this real estate bubble." But he refused to make a macro call, I believe, largely because the Chinese government could socialize losses from a popped bubble in order to prevent it from fatally damaging the real economy.
And note, most strategists do see froth in China. The question has always been what the policy response to the froth would be. The Chinese have moved fairly aggressively against credit growth of late. This is what has Andy Xie changing his tune somewhat. But once we see the response, we still have to discern what impact it will have on the property sector and the real economy. If you want to see a good tete-a-tete on these issues watch Chanos and Stephen Roach discuss the outlook for China’s economy. I am more bearish than Roach in that I believe all bubbles spill over into the real economy. My view is that this spill-over can be mitigated by socializing losses but there will be a sharp cut in demand for building materials and associated sectors after the bubble has popped.