Top 10 China Stocks, While They're Hot

The central government in Beijing doesn't have much control over pollution, and the same goes for the economy. This former command economy doesn't take commands from the center very seriously at the moment.

The Coming Games

Add an increasing sense that the center has lost control to the difficulty of dealing with problems of this magnitude -- runaway growth, rampant speculation, out-of-control lending and increasing regional inequality -- and you have a recipe for explosive confrontation. The Communist Party's hold on power is just shaky enough that national party leaders are loath to share power with anyone, even their own local counterparts.

The confrontation this time is likely to take the form of higher interest rates, a crackdown on lending, drastic efforts to shrink liquidity and political repression of local economic cadres. It won't be as dramatic as tanks rolling through Tiananmen Square in 1989, but the effects in the economic realm could be just as catastrophic.

The Communist Party is in the midst of an awkward leadership transition, which makes any bold moves unlikely soon. And no one in the Beijing government wants to jeopardize the 2008 Summer Olympic Games in the capital or tarnish their propaganda value. So efforts to control the economy before then are likely to speak loudly and carry a very, very small stick.

But after that? The economic gloves come off.