China is in debt??? Couldnt believe it.

While surfing youtube I happened upon some commenter, talking about China's debts. I was sincerely amazed by the notion. Isnt the US kneedeep in debts with China? Doesnt that mean China should have more than enough solvency to pay its own debts? I googled and came upon this article in www.businessweek.com...

What I understood from the article, that China has indeed debts, which amout to about a third of their GDP. It still seems mostly kind of an internal chinese problem, as chinese local governments via Local Investmet Companies borrowed from China's state own banks. Kind of like having individual states borrow from the Federal Reserve in the US for their infrastructure projects - without any securities.
There are some speculations in the article about those credits could go to default. ""Unfortunately, this smells like China's last banking crisis," says Shen Minggao, an Asia-Pacific economic analyst with Citigroup"

Now I have some memories about someone talking about an Asian Flu some years ago, but all I remebered were banks in Japan and the south-asian Tiger states in trouble.

Googling for China Bank Crisis brought up an article from 2005 by www.stratfor.com..., (rhich they e-mailed me free for receiving my spam adress), that mentions, that the Chinese government was worried about Bank collapses, because the WTO had forced it to allow international banks to compete (a bit) with national banks in China. But those worries led to a series of regulations, that made sure, that foreign banks would have all incentives to partner with the national banks instead of competing against them, so that crisis was simply a hypothetical one

In www.forbes.com... I found a Gordon G. Chang predicting:

"So will there be a new banking crisis? Many argue that the state banks will never default because the central government will use its foreign exchange reserves to shore them up. Although Beijing has taken cash from its reserves to partially recapitalize these institutions and could do so again, foreign currency is not much use, as a practical matter, in the midst of a local currency crisis. China can't satisfy local currency obligations with dollars, euros or yen. Moreover, a massive purchase of renminbi with foreign currency--to pay off depositors, for instance--would send the value of China's currency skyward and therefore would make the country's exports uncompetitive. That, inevitably, would wound the broader Chinese economy."

While I still don't get the "new" in "new banking crisis", as I still not figured out, when Chinas last Banking Crisis occured (Chang mentions something about banks used to funnel government cash to state enterprises and state projects instead of becoming modern institutions, and as something, widely believed to have happened only in an undated past... so prolly some cold-war remnants from the Tienamen times.) I actually think, that doesnt sound so bad. Isnt everyone complaining, about the Chinese currency being artificially undervalued? Wouldn't that fix the problem of China, outcompeting everyone with slave labor?