By Carl Delfeld

Give China its due. In 1990, its economy was the same size as Taiwan's.

Now it's more than 10 times larger.

This explosive growth has led many China bulls out there to fervently believe that Chinese economic growth and its stock market are on an unstoppable upward trend. And that it's a one-way bet and a sure ticket to heart-stopping returns.

We've heard these sentiments before. "The market can never go down." This is a cause for concern, because the ash heap of investing history is reserved for those who believe they could never be wrong.

There are good reasons to be confident in the market long term. With its growing population, expanding middle class and strong manufacturing base, the nation's market is rising along with capitalism. But what's also interesting is that the China bull story is so strong and captivating that many haven't even noticed that the Shanghai market is down approximately 20 percent since July 2009.

Sure, this could be just a lull, and cheap Chinese stocks are ready for another take off. But it's important to take a minute and look at five macro-risks in China before you can drill down and find favorable long-term investments.

China's Formula For Success

The recipe for Chinese growth so far isn't some magic formula. It's been based on low wages, huge amounts of investments and a focus on export growth.

But I have some unwelcome news. The country has substantial overcapacity in manufacturing and infrastructure, as well as deteriorating credit quality and weakening export markets. And they're experiencing a sharp correction in housing prices after more than two decades of explosive growth. This morning, The Wall Street Journal reported that real estate prices in nine of its largest cities fell by 4.9 percent year-over-year in April alone. This after prices rose 21.5 percent the year prior. With investors now seeing downturns in their real estate holdings, this could impact consumer spending in the short to mid term.