Ping!
It's really a lack of private investment and an over-reliance on bank loans to fund business expansion. There is not a very large "investor class" in either Japan or China (or in most of Asia for that matter). Most folks put their money in the bank and expect a decent rate of interest. This puts all the pressure on the banks to find good places to loan this money to. Most of the ventures in China are highly risky by U.S. banking standards and like Japan, when they go sour (without proper transparency and controls) the bank often just props up the bad loan with more money, carrying an inefficient failure on the books as long as possible.
In Japan, such non-performing loans kept quietly growing and caused a 10-year deflationary recession. In China, banks are forced to keep propping up former Communist-owned businesses that still don't know how to compete efficiently. With no fear of bankruptcy, these enterprises just keep eating up resources and mis-allocating scarce capital.
It's a dangerous situation and will come crashing down in the next 12-months, I believe. But all is not bad here. When Japan tanked, we hardly felt it. Actually, it gave Bill Clinton a huge lift as the U.S. Stock Markets received a huge amount of investment as a safe-haven. Later in the '90s, when George Soros knocked off the other Asian economies in Burma, South Korea, and Thailand, the U.S. markets boomed again.
I think that when China proves to be a paper tiger, we'll have another stock market boom here at home.