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So far, China has proved to be remarkably resilient in the face of America’s Great Recession. Doomsayers predicted that its economy would collapse as U.S. imports contracted, yet it continues to expand rapidly.

Even the World Bank now expects growth in China’s real gross domestic product this year to be within a whisker of Beijing’s official target of 8 percent. The Shanghai stock market has exploded, and the country’s appetite for raw materials is rekindling speculative fervor for commodities. The nation’s giant, 4 trillion yuan ($585 billion) stimulus package is boosting car and home sales and encouraging hopes that consumer demand will drive future economic expansion.

Still, doubts persist. Because it is based on rampant credit growth and fails to address deep structural flaws in the economy, China’s resurgence may be vulnerable to weaknesses similar to those demonstrated by the U.S. during the recovery that Alan Greenspan engineered after the technology sector bust.

“The bullish group-think on China is just as vulnerable to massive disappointment as any other extreme of bubble nonsense I’ve seen over the last two decades,” Albert Edwards, a global strategist at Société Générale, wrote in a note to clients in June. Edwards points out that electricity output — one of the few pieces of reliable macroeconomic data to come out of the country — has been declining. Industrial profits and exports are also contracting sharply.

The key question surrounding China’s future prosperity is whether the country can wean itself from its dependence on exports and on massive investment growth. Yasheng Huang, an economics professor at the Massachusetts Institute of Technology’s Sloan School of Management and author of Capitalism with Chinese Characteristics, dismisses the notion that rising domestic consumption can offset declining exports. During the past two decades, Beijing’s economic policies have deliberately discouraged small businesses in rural areas, according to Huang. “In the 1990s foreign direct investment, national champions, massive infrastructure developments and urban renewal were elevated to the top of the economic policy agenda,” he writes.

The nation’s rapid growth appears to testify to the success of Beijing’s policy. Impressive new airports in Shanghai and Beijing and the construction of numerous splendid office buildings in both cities provide visual confirmation of China’s arrival as an economic superpower.

But appearances can be deceptive, notes Huang. Much of the economy is still controlled by the state. Although the investment share of GDP has approached 50 percent in recent years, the role of the private sector has contracted. State-owned enterprises receive the bulk of bank credit at the expense of small businesses, which are forced to borrow (at usurious rates) outside the official banking system. Foreign investors benefit from tax cuts that give them an advantage over indigenous entrepreneurs.

This policy of suppressing private businesses in favor of state-controlled national champions and foreign exporters has had profound consequences. In recent years, China’s 500 million rural workers (two thirds of the total workforce) have watched their income share of GDP drop below 50 percent, whereas households in Shanghai and other cities have seen their pay go up, Huang has found. Income inequality in China has climbed to Latin American levels. Education and health services in rural areas have been squeezed to pay for such expensive infrastructure projects as Shanghai’s 300-miles-per-hour Maglev train.

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