When the financier George Soros attacked the British pound in 1992 and famously “broke the Bank of England” he was trading on a conviction that the currency was misaligned. Britain devalued after squandering its reserves in a vain defense. Mr. Soros walked off with $1 billion or more. To the surprise of many, though, the U.K. economy soon picked up once the pound found its proper level. China’s raging battles with currency speculators are unlikely to end as happily for the country. That’s because turmoil in the currency markets reflects a much more perilous imbalance than an overvalued yuan: China is now lopsidedly dependent on ever larger inputs of local bank credit to keep sputtering growth from declining further. The country is already littered with “zombie” factories, empty apartment blocks that form ghostly suburbs , mothballed power stations and other infrastructure that nobody needs. But yet more wasteful projects […]