Why the Chinese Will Continue to Eat Our Lunch

Because they understand what is going on, and they are willing to do tough things to make sure that things don't blow up in their faces:

China’s banking regulator told lenders last month to conduct a new round of stress tests to gauge the impact of residential property prices falling as much as 60 percent in the hardest-hit markets, a person with knowledge of the matter said.

Banks were instructed to include worst-case scenarios of prices dropping 50 percent to 60 percent in cities where they have risen excessively, the person said, declining to be identified because the regulator’s requirement hasn’t been publicly announced. Previous stress tests carried out in the past year assumed home-price declines of as much as 30 percent.

(emphasis mine)

The Chinese understand that the purpose of stress tests is to identify problem institutions, not to reassure markets, so they will thoroughly investigate their banks, and then probably jail senior management at some of the worst run institutions.

It might be painful, but it gets ahead of the events, as opposed to our method, extend and pretend, which means that when future problems occur, the Chinese have better options available to them.

I guess that the leadership of the PRC aren't worried about being called "Socialists," because they call themselves socialists.