This summer has seen many headline articles about China’s financial situation, from the roaring stock exchange earlier this year to the rapid tumble of the past few week. Obsessive coverage of the ups and downs of the Chinese economy are more than just an idle curiosity; what happens to China and how their government handles it could have profound effects across the world.

On July 7, the Chinese stock market crashed. Over 90 percent of the shares listed on Chinese exchanges had to be suspended or halted. Shares tumbled, losing on average a third of their value. All told, nearly $3.5 trillion in wealth was completely lost.

Today, Reuters released a survey it conducted of over 1400 Chinese companies revealing a enormous amount of corporate debt in the red state. At the present moment, China’s corporate debt is nearly twice as large as that of the United States. The Reuters study puts China’s debt at about 160 percent of GDP or $16.1 trillion. Standard & Poor, a credit agency, estimates that mountain of debt will rise 77 percent over the next five years to $28.8 trillion.

“Prices are declining and revenue is slowing, and in this environment you cannot force too quick a deleverage – that would lead to a hard landing,” said Tao Wang, UBS head of China research.

The effect of all this is a marked slowing of the Chinese economy, already expected to reach a 25-year low this year. It is widely believed that the majority of corporate lending goes to state-owned enterprises that are notoriously inefficient.

Yet few outside companies are listed on the Chinese stock exchange and fewer still take corporate loans from the Chinese state. So what is all of the hullaballoo about?

The concern is over how Chinese leaders (Xi Jinping and Li Keqiang) will react to a crashing stock market and slowing economy.

“When the stock market was soaring the press cheered the bull run as an endorsement of the economic reforms of the Xi-Li team,” writes The Economist. “Now that it is falling, regulators want to shore up the leadership’s reputation.”

In the short term, the Chinese government will intervene to stabilize the markets, causing unnatural ripples throughout the economy. The greater worry is what will China do in the long term to restore its lost prestige?

Already China is trying to makes its presence felt more keenly on the world stage. From blocking UN revolutions to creating an alternate to the World Bank, China as made no effort to hide its desire to rewrite the rules of the international arena to better suit its ambitions. Just look at its deceptive ‘island building’ in the South China Sea- a bold strategy to increase its ocean territory beyond the globally recognized boundaries.

China is willingly infringing on the rights of smaller Asia countries, such as Vietnam and Thailand, simply because there is a possibility of finding oil. Already, the offended countries are crying out for American protection.

What will America do?

If China continues to try and bolster its reputation, it seems inevitable that somehow somewhere America will be drawn into the fray. And if the world’s two economic powerhouses are at odds with one another, there’s no telling what may happen next.