We’ve all heard about the crisis in Europe, how it’s weighing on the economy, and how a collapse there could make the 2008 crisis look tame in comparison.

But a few eye-catching press reports have been raising serious questions about China. It’s clear that the country has an enormous debt bubble—one created on purpose (at least in part) to get its economy through the 2008 downturn. The questions are: Will it pop and if so, when? Is the country’s $3 trillion stockpile of foreign cash enough to mitigate a disaster? Is the country’s patented brand of aggressively state-subsidized capitalism a new paradigm (cough) or does each successive intervention worsen an ultimate reckoning? And how badly would a Chinese crash affect the rest of the world?

The situation there reminds me of what 2007 felt like here: Lots of signs that things were seriously amiss and an understanding that we were in for a nasty fall but couldn’t know exactly how it would unfold (emphasis mine):

China’s sovereign-wealth fund stepped in Monday to buy shares of the country’s battered banks, which have been caught in a selloff that analysts say reflects a broader loss of trust in the integrity of corporate earnings and government statistics…

Stock investors are fleeing China’s state banking giants partly on fears that they aren’t coming clean about their bad-debt problems after several years of blow-out lending.

That’s from The Wall Street Journal’s look at this today reporting that the Chinese government propped up plunging shares in Chinese banks yesterday by buying their stocks.

Panics are almost always about lack of trust. When investors or depositors start to distrust what they’ve been told by companies or governments and fundamentals begin weakening, look out below.

This is Reuters yesterday reporting on the risks of a Chinese crisis:

The risks of default are rising. Nearly 85 percent of the local government finance vehicle loans in northeast Liaoning province, for instance, missed debt service payments in 2010, an audit report posted on the Liaoning Daily website said.

But in visits and interviews at city-run vehicles around China, officials appeared unworried. They say they were only following Beijing’s directives to keep growth on track, and the central government would surely step in to bail them out.

Reuters talks to a state company that’s casually unconcerned that it’s insolvent (by more than a billion dollars) and about to default on its loans. Its chief thinks it can somehow make it out of its fix by investing in real estate projects.

And here’s an unbylined Bloomberg News piece (UPDATE: actually, while the byline says “Bloomberg News,” the reporters’ names, Henry Sanderson and Michael Forsythe, are at the bottom of the piece) from July with some terrific reporting:

A 3,300-mile (5,310-kilometer) tour of three cities in China, coupled with reviews of dozens of Chinese-language bond prospectuses that offer an unusually transparent view into local government debt, shows just how widespread such borrowing has become. In China, as in the U.S. before the collapse of the subprime mortgage market in 2007, local debt is backed by collateral that is overvalued, may be hard to sell and, in some cases, doesn’t exist…

“It’s a huge myth that land sales are going to be able to even support the interest payments let alone the principal payments,” says Stephen Green, the Hong Kong-based head of Greater China research at Standard Chartered Plc…

Local governments set up more than 10,000 so-called financing vehicles in the past decade to get around laws prohibiting them from taking direct loans. One third of them don’t have cash flow to service their loans, China’s banking regulator says.

That reporting is backed up and made vivid by some great color that illustrates the boom/bubble mentality:

Cranes abound amongst new high-rise apartment complexes with names like Wealthy City, surrounded by billboards showing pictures of Caucasian women strolling through shopping malls featuring brands like KFC and Microsoft…

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.