If the China bears turn out to be right, just how bad could things get? London hedge fund manager David Yarrow said in a recent investor’s letter that Europe’s debt crisis is far less worrisome because people have adjusted to the idea, and so markets know what’s coming. But whether China can handle its debt troubles is still up for debate. And a debt implosion in China would wreak far more damage, partly because it’s not something markets have priced in…

All told, Avent estimates China’s debt-to-GDP ratio is roughly 80%, which, if coupled with China’s expected 5% and 9% over the next few years and fairly conservative spending, would put China back in the black in no time. That’s a lot different than the situation in Greece, where debt levels are equally high, but growth is nowhere in sight and lenders are pulling away. There’s also the fact that, unlike in the U.S. and in Greece, China is toting around some $3 trillion in foreign exchange reserves, which makes it easy to raise money in a flash when times get tough.

But here’s where things get tricky. For China to keep up its growth rate, its consumers must continue to spend. That’s a tough bet if inflation continues to rise.