The end is nigh. The curtain is lowering on the amazing investment story that was China, and investors had better flee before the house lights come up.

This is the growing buzz, which started late last year after famous short-seller Jim Chanos revealed he was betting on a Chinese bubble bust. The more-than-20% slide in the Shanghai Stock Index since the beginning of the year has just added to the Chanos/China bubble bandwagon.

If Chanos is right, then companies like BHP Billiton (NYSE: BHP) and Vale (NYSE: VALE), which are providing the raw materials for the infrastructure construction that is China's growth engine, could see some rough times ahead.

Look and ye shall find
For those looking to join Chanos' side, there have been tasty tidbits popping up in the headlines over the past six months, starting with the fear that the lending frenzy (Chinese banks made $1.4 trillion in new loans last year, almost twice the 2008 growth) that accompanied Beijing's $585 billion stimulus package was forcing too much liquidity after too few assets.

Some analysts claim that significant portions of this lending went to fund construction projects that, while helping keep employment and GDP numbers up, were unnecessary or redundant and will never provide the returns needed to pay back the loans.

Others cite evidence that significant numbers of these loans went into investments in real estate and the stock market, both of which could lose value, leading to the inability to pay back the loans. There have also been claims that much of this is funding speculation.

Girding their loans
Adding weight to the argument that China is in for its own subprime loan debacle, the country's major banks (which are state-owned) have started planning to tap equity markets to increase their capital levels. While pumping out $1.4 trillion in new loans in a year will stretch anyone's balance sheet, the underlying implication is that Beijing is trying to get ahead of the impending wave of bad loans (learning a lesson from U.S. banks' failures) and is looking to share the pain with global investors.

Now, these concerns may be overblown by people looking to support their theories (or portfolio positions), but it is enough for me to want to steer well clear of Chinese banks. If you agree, I urge you to examine your portfolio for any stealth exposure to the banks. Exchange-traded funds like the iShares FTSE/Xinhua China 25 Index Fund (NYSE: FXI) have heavy exposure to the banking industry and could cause you unexpected pain.

Cheap no more
As demonstrated by the series of strikes at Honda plants in the past month, there is a spreading push for better wages in China. This is great for Chinese laborers, but it puts a kink in the country's mercantilist growth strategy. If China is no longer the cheap source of labor, its economy, based heavily on export industries, will suffer.

On top of this, the recent unpegging of the yuan could mean a stronger currency relative to other emerging markets, which would also reduce the competitiveness of China's exports.

On the other hand
However, these developments aren't necessarily as bad as they may seem at first blush. While global retailers and manufacturers are quite skilled at quickly moving to the cheapest source, it still takes some time, so the jobs won't disappear overnight.

 Additionally, higher wages translate into higher disposable income, which translates into more consumption. Since most companies with something to sell (which is all of them, I think) recognize this opportunity in China, many will keep facilities in-country to specifically address the domestic market.

Companies like Ford (NYSE: F) and Nike (NYSE: NKE) are already reporting rapid sales growth in China, and for them the prospect of an even larger pool of Chinese shoppers is like a blend between a 5-year-old's Christmas Eve dreams and rainbow unicorns.

Boots on the ground
But investors looking at China as a part of their portfolios need to cut through the headline fears and unicorn bleating. To help you, the Motley Fool Global Gains team will be in China in the coming weeks, trying to assess the situation from the ground and looking for companies that can prosper even if Jim Chanos is right and we see China's bubble pop. If you'd like to get their firsthand observations, just drop your email address in the box below and you'll receive their dispatches from the road.

Nate Weisshaar owns none of the companies mentioned here. Ford Motor is a Motley Fool Stock Advisor pick. The Motley Fool has a disclosure policy.