Last week we penned the same question and answered “student loans”. Today we look at the threat from China, specifically the Chinese shadow banking system. Fear that the system is about to implode led to worldwide drops in the markets over the last couple of days including a 300-point drop in the Dow yesterday.

China has built up this huge property and infrastructure system that was driven by easy credit that often ignored if the project made economic sense. As an example, there are stories of new airports that get maybe one or two flights a day. Excess like that cannot last.

The shadow system is composed of loans that were packaged together and sold to investors. Sound familiar? Maybe it brings back memories of subprime deals in the US. In a CNBC interview from Davos, the Chairman of a the Industrial and Commercial Bank of China said that the bank wouldn’t bail out investors in the event of a default.

China depends on cheap credit. A default in the system might have a Lehman like effect in China. The Chinese government may or may not bail out the investors and the collapse of the shadow economy may or may not happen. But in the last couple of days the markets didn’t want to wait to find out.

Another potential crisis to watch.