My first blog on China was the thesis, namely that their performance over the past few years needn't indicate irresponsible monetary policy.
Then came the antithesis: Although it was theoretically possible for a weak-yuan policy to cause domestic price inflation, even without growing the Chinese monetary base, it would require falling asset (or rather, non-CPI basket) prices, which I ruled out. Hence I thought my friend was right, and that China's rulers must indeed be guilty of running the printing press.
And now the synthesis: I just read in the WSJ that China's stock market is down something like 50% since its peak in the fall. I knew it was down, but I had no idea how much!
Therefore, my new back-of-the-envelope summary: China's free market reforms have indeed spurred genuine economic growth. But they grew the monetary base rapidly for a while, and that surely spurred malinvestments. (It didn't appear reckless to them perhaps, because they were tied to the dollar. But the Fed was reckless at that time!!)
Lately, they have become alarmed. With the "sterilization" process, they are not expanding as they once were. But as with the Fed's belated halt in double-digit rates of monetary expansion, methinks it's too late.
I don't know enough about China's institutional structure to say whether the authorities will allow a full-blown "recession," but they would have one if they were a true market economy.