The answer is that if you keep calm, China has problems but they are manageable. Because of the unusual model of state controlled capitalism where the government, not the markets, is in ultimate control, it is hard for analysts of all types to read what will happen. Therefore a slowdown from exotic growth to significant growth causes near panic across the world. Yet China is financially very strong. Its external debt is just under a trillion dollars but its currency reserves are over three trillion. Too much has been lent to Chinese citizens by its banks to buy shares and property which has inflated both above either’s true value and this is bringing about a painful correction which will slow its economy further. But in the end the second largest economy in the world controls its own currency and has the resources to ride out its own storms. Its record thus far suggests it will find a safe course to sail.
The problem is that too much of the rest of the world has taken Chinese mega growth as a bedrock certainty, leading to overproduction, especially of oil and commodities, and to over borrowing. It is not clear whether some emerging market economies can cope with the consequences and whether international banks are as secure as was hoped should an Eastern credit crunch develop. This is an economic situation which has dangers, but also opportunities, and it can be managed by cool heads and steady hands, neither of which are in evidence in a bear market if one develops.
Remedies require political decisions, because as always in economics, it is a case of organising competing tensions into an acceptable model, and opinions vary as to what that should be. The greatest risk out there is that far too much of the menu of economic management has been ceded to Central Bankers whose caution, because of their discomfort in the political undertow of their remit, usually drives them to do too little too late. Right now that could be quite a problem.