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David Merkel, who writes the Aleph Blog , isn't buying into the enthusiasm surrounding China these days. Its Shanghai stock exchange composite index has risen more than 75 per cent this year and the authorities reported on Thursday that the economy grew by 7.9 per cent in the second quarter. Slowdown? What slowdown?

However, Mr. Merkel is concerned that China may have created what he calls a "lending bubble." He explains:

"What seems to be happening is that the powers that be in China are encouraging banks to lend aggressively. Firms in China aren't finding a lot of opportunities in export markets, so they build up inventories 'that they know they will need eventually.' Financial counterparties and individuals speculate on financial assets like real estate and stocks as they find cheap financing available."

He's not just thinking out loud here. He's moving money away from export-driven sectors that are driven by Chinese demand, such as commodities, and instead embracing steady-she-goes utilities.

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