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IMF Managing Director Christine LaGarde is in China today. Speaking at the International Finance Forum , she said the global economy has entered "a dangerous and uncertain phase": Later in the speech, LaGarde addressed China's economy directly. Overall, she gave it good marks. But she warned against complacency and said that all nations need to recognize that they are part of a global economy and that no country is immune from the effects of problems elsewhere, even halfway around the globe: It is on the right path in terms of reducing domestic vulnerabilities—by moderating the pace of credit growth, increasing provisioning and capital, and expanding scope of macroprudential policies. There is still scope for using monetary policy to restrain credit growth. Fiscal policy is appropriately moving back to balance. But if the growth outlook deteriorates significantly, it could become the first line of defense, given ample fiscal space and capacity to deploy resources quickly. China is also on the right path in terms of reorienting the economy towards domestic demand. As Laozi said, “a journey of a thousand miles must begin with a single step”. Indeed, China has already made good progress on the road to rebalancing. The current account surplus has fallen from an all-time high of 10 percent of GDP in 2007 to just over 5 percent last year. While some of this comes from weak global demand, some of it also comes from higher imports—which helps the global economy. Now is the time to move further from exports and investment toward consumption—including by further boosting household incomes and expanding social safety nets. Reform of the financial system continues to be important and, as we have said before, China also needs a stronger currency in real effective terms. Read the full speech here .

China's economy continues to thrive compared to others around the globe. The growth rate for the third quarter was near 9%. Great returns for 2009, and the near future looks even brighter to most economists and investors. But at Fortune/CNNMoney.com , Bill Powell writes of some concerns over China's escalating debt. According to Powell, the Chinese government has issued massive loans to boost infrastructure, manufacturing, and real estate. The loans total $1.27 trillion, "up 136% from the same period last year." According to a recent analysis by Monaco-based hedge fund Pivot Capital Management, China's total lending reached 140% of GDP at midyear. That kind of lending makes China an "outlier" compared with other BRIC (Brazil, Russia, India, and China) countries -- and is already well beyond the levels that "have led to sharp and brief credit crises in the past," the Pivot Capital report contends. Moreover, an increasing number of Chinese loans are being funneled into projects unlikely to generate an attractive economic return. From 2000 to 2008 it took just $1.50 in new credit to generate $1 of GDP growth. Now that ratio is 7 to 1. (In the U.S., just before the financial crisis hit, the ratio was only 4 to 1.) That's because the loans are creating huge amounts of manufacturing capacity -- which is unneeded in the bears' view. China's spare capacity in the cement industry, for example, equals the total annual consumption in the U.S., Japan, and India combined. So where will the growth come from? China's export markets are tapped out. Its domestic consumption, stalled at around a third of GDP, hasn't yet started to rise significantly. Additional manufacturing investment would be crazy, leading arguably to a global deflationary bust of epic proportions. Read the full article here .