Since February, IVN has been reporting on the increasing chances of a major financial meltdown in the Chinese economy.

Then in April, IVN reported on the fact that state-owned businesses were being allowed to default on bonds in China.

And again, in July, IVN reported on China's rush to liquidity by dumping gold into the markets and selling off U.S. bonds, in an effort to stabilize both its capital and bond markets with more currency.

For months the facts have been very plain: China has way too much leveraged debt, its markets lack transparency, and its capital projects have often built "bridges (and sometimes cities) to nowhere."

And yet many American politicians, market analysts, and the media still seem to hold China as some form of ideal -- that it has rapid growth in its economy while ours has been slow, but steady.

One market analyst went on CNN Tuesday to say:

"The collapse of the equity bubble tells us next to nothing about the state of China's economy," said Mark Williams, chief Asia economist at Capital Economics. "In fact, recent data have been more positive than the headlines might suggest, with large parts of the economy still looking strong."

Which parts of the economy are still looking strong? The Chinese devalued their currency this past month, yet now has to rush to provide liquidity into the markets that were already stunned by the sudden devaluation -- markets that already received incredible liquidity earlier this year after both a bond selloff and gold dump. China's transparency in its markets and political connections is about as honest as Orwell's character, "Squealer the Pig," in

Animal Farm, rushing around spreading the party line's propaganda. And it's showing in the real numbers: the government's projections of a 7 percent growth are simply not manifesting themselves into the real economy where they can be seen.

In the immediate future, the Asian markets plunged another 7 percent on Tuesday, with reactions in Europe mixed. Overnight futures in America have been mixed, but will largely depend on European reactions to Tuesday's continued slide -- yet they seem mostly set for a rebound.

But we need to look past the shortsightedness of single-day crashes and gains.

In the longer term, as a nation, we need to rethink China as being some form of a capitalist ideal, because the only capitalist ideal it is really showing off well is the boom and bust cycle that destroyed so many in European and American economies a hundred years ago.

If China wants to be a major player on the world stage, our governments must insist upon greater transparency, greater equity in trading partnerships, and the protections given to creditors throughout the rest of the industrial world.

Politically, it seems the Chinese are quite content to remain where they are -- a semi-controlled economy under the watchful eye of the party leadership. But that won't encourage world growth or partnerships, especially as the flaws in their management keep becoming apparent.

Photo Source: Reuters