Will the boom turn to bust?

China has been much in the media of late; the country's economic "boom" has become a business buzzword. But where there's a buzz, there's often a sting, and the warning signs of an impending bust cycle are emerging. Even China's leaders have hinted in recent weeks that the economy, after posting remarkable 12.8 percent GNP growth in 1992 and first quarter 1993 growth 14 percent above the level achieved during the same period last year, needs to slow down.

The real question, of course, is whether the Chinese government can ease up on the throttle without throwing the economy into a tailspin. Nobody--least of all foreign businesses--wants a return to the austerity conditions of 1989-90, but rising investment, construction material costs, transportation bottlenecks, real estate prices, corruption. and inland-coastal disparities have begun to trigger alarm bells in Beijing. A clamp-down appears imminent, as evidenced by recent announcements that credit...