Are new troubles brewing in the world's second largest economy?

Customs data for February showed China's exports falling 18.1% in February from last year versus expectations for a 6.8% rise, leaving the largest trade deficit in two years and receiving blame for weighing on the stock market Monday. The disappointing trade data was blamed on the Lunar New Year holidays in China.

Gary Shilling, president of A. Gary Shilling & Co, tells us in the accompanying video this data is "some cause for concern particularly because China is slowing," but adds that this is the whole point as China shifts its economic model from export-driven to consumption-driven, which is considered to be a more sustainable course moving forward.

Related: Markets are headed higher but stick with defensive stocks: Gary Shilling

Meanwhile, Friday marked the the first default in China's corporate-bond market. The failure by Chinese solar-equipment maker Shanghai Chaori to make a $14.7 million bond-interest payment was cast as showing Beijing's willingness to let some weak companies fail -- the Chinese government has typically kept risky borrowers afloat through bailouts or extensions, reports the Wall Street Journal.

Related: Bond default a "moment of reckoning for the Chinese government"

Shilling says, "Chinese leaders are control freaks," and he believes allowing this default is one way they are asserting their control.

But the Journal points out the default adds to worries over risks existent in the financial system already.

Financial scandals are one of the key red flags China-watcher Michael Pettis keeps his eye on when it comes to the Chinese economy, for example. He's a finance professor at Peking University in Beijing and senior associate at the Carnegie Endowment for International Peace. He told us in an interview last Spring that the Chinese financial system doesn’t really “do” defaults. When borrowers are unable to repay the debt, the problem is usually dealt with by forcing losses on some other entity. Also, when these problems arise they tend to be immediately suppressed, so information doesn’t leak out. So stories of defaults in the banking system are warning signs.

Shilling says in terms of the threat of some kind of hard landing, shock or crisis occurring in China, the question comes down to execution. The government certainly has the ability to bail out any company or shadow banking operation, Shilling says.

He makes an analogy to the Federal Reserve in 2008 to illustrate the challenges. The Fed's 2008 meeting transcripts show the Fed admitting they were behind the curve, Shilling says. "The housing market started to collapse February of 2007 and over a year later the Fed didn't know what was going on," he says. They have all the money in the world and could bail out anything in the U.S. they want to; it "isn't the ammunition, it's the ability to fire it at the right time."