You can only get famous by making big predictions, and a little more than a year ago, famous (or infamous) short-trader Jim Chanos made it known he was bearish on China. Headline writers and finance-TV producers translated this into "Chanos Is Short China!" Perhaps they used a few more exclamation points, but you get the point.

At the time, Tim Hanson, co-advisor for The Motley Fool's Global Gains newsletter, pointed out that Chanos' stance was slightly more nuanced, but still missed the true nature of China's economic situation. A year on, the Shanghai Composite Index is down 14%, almost the opposite of the S&P 500's strong 13% return. So was Chanos right?

Not that easy
Unfortunately for those trying to follow Chanos' lead, you can't easily short the Shanghai Composite because only domestic Chinese investors can invest in the shares represented by that composite (A-shares), and shorting has only recently been allowed by Chinese regulators and is still very limited.

To get around this, Chanos hinted that he was looking at widely traded companies that would be significantly affected if China's bubble popped. These likely included natural resource producers such as BHP Billiton (NYSE: BHP), Rio Tinto (NYSE: RIO), and Peabody Energy (NYSE: BTU). Over the past year, these three have returned 29%, 43%, and 46%, respectively. Ouch.

Australia, which sends more than a fifth of its exports (most of them raw materials) to China, could also be affected by a slowdown in demand from China. In 2010, the Australian dollar has appreciated 14% against the U.S. dollar. Again, ouch.

Not over yet
However, there is growing sentiment that China is overheating and could see a slowdown in growth this year. The argument goes like this: As China's central bank attempts to cool rising inflation by increasing interest rates, it will result in slower growth and less demand for imported goods (mostly raw materials). If this comes to fruition, 2011 could be the year when resource-producing companies and resource-rich countries take a hit.

As it happens, the Global Gains team will be heading to Australia in a few weeks to meet with several Aussie companies. Let's check in with Tim and the other members of the team to see where they stand on the prospects for China and what they will be looking for as they explore Down Under.

Tim Hanson: China's growth is expected to slow in 2011 to 9%, but it could be slower than that if China reins in the loose money that's been spurring fixed asset investment. Because as Michael Pettis pointed out in his recent China Financial Markets newsletter, China has not yet succeeded in spurring sustainable consumption. "Of the four fastest growing areas of retail consumption [in China in 2010]," Pettis wrote, "the first (gold, silver, jewelry) is really more likely to be a proxy for investment than consumption, while the second and the fourth (furniture and household appliances) are related to real estate investment, and so might also be considered as much an indication of soaring real estate investment as of rising consumption." Such a slowdown would lead to a decline in commodity prices and Australia -- given how much the economy there relies on commodity exports to China -- would be a natural short to profit from.

But it's likely that Jim Chanos and I can both be right about China and, therefore, Australia. The reason is that we're contemplating the situation over very different time horizons. Chanos has been looking for a sharp, near-term drop, and while he's been waiting well more than a year for that to happen, he continues to reiterate his thesis at conferences and in the media. I, however, am taking a longer-term view and think patient investors will be rewarded for maintaining exposure to China's growing economy and to the commodities it consumes for the next decade or more. I'm hopeful we can get some good company research done on the ground in Australia, enabling us to buy our best ideas if we do experience a downturn this year.

Nathan Parmelee: I won't be surprised if China's growth slows below the forecast 9%. With so much of China's economy tied to real estate and the government focused on cooling that market down, it will probably be hard to avoid. That will probably slow China's demand for the raw materials that Australia provides, but any slowdown should be temporary because China still has years of growth ahead of it, and its neighbors will be more than happy to pick up many of Australia's resources at more attractive prices.

Ask CLP Group what its biggest challenges are in getting a new power plant commissioned in India and you'll hear that getting a consistent supply of natural gas or coal is near the top of the list. When it comes to natural gas, India isn't the only company looking for consistent supplies. Japan and South Korea have next to no oil or natural gas resources within their borders and have been quick to lock up coal seam gas supplies from Royal Dutch Shell (NYSE: RDS-A) and BG Group as they become available.

Similarly, Australia should find a ready market for its agricultural products in Southeast Asia and the rest of the world because of current grain shortages and tightness in agricultural commodities. So while China's growth might slow from its rapid pace, it should recover and many of Australia's export industries should still do well while China gets its house in order.

Nate Weisshaar: It looks like we're unanimous in thinking China's growth will surprise to the down side in the near future. I'm going to be totally unoriginal and say that this should only be a short-term fact, though, as China and India and the other developing nations of the world have a lot of urbanization and infrastructure development ahead of them.

However, I'll be original in saying that my concerns with Australia are more significant. The country has one of the highest household debt levels in the world, a housing market that has generally seen prices rise for nearly 10 years, and has skated through the global financial crisis largely because of China's continuing demand for resources.

Australia's banking system is highly concentrated with four banks, Commonwealth Bank of Australia, Westpac Bank (NYSE: WBK), ANZ Bank, and National Australian Bank, completely dominating the market. More worrying is that these banks' loan portfolios are dominated by mortgages. Even if these are high-quality loans, paying a mortgage becomes tough when you're unemployed. With unemployment currently at 5%, this isn't much of a worry, but with 7.5% of the economy driven by demand for natural resources, even a short-term drop in demand would be painful. Just think of all the knock-on effects a slowdown in the mining sector could have on Australia's economy.

If you want to follow the Global Gains team and receive their thoughts as they travel through Australia, visiting local companies and talking to their management teams, just click here for more information.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.