Jim Cramer thinks Wall Street's fears of a subprime crisis in China aren't exaggerated, but he believes earnings from U.S. companies will be strong enough to overshadow that negative factor in the market's calculations.
Appearing on CNBC's Power Lunch, Cramer said, "This Chinese government is determined to get rid of the overproduction, get rid of the culture that got too risky for them... We never want to be complacent after what happened in this country, but panic is not a strategy."
(Read more: Earnings this week could make for cautious trading)
There are signs that one of China's high-yield trust investment products could default for the first time. The trust, 2010 China Credit / Credit Equals Gold #1 Collective Trust Product, has to pay investors by the end of the month, but its marketer, Industrial and Commercial Bank of China, said it will not be coming to its rescue.
(Read more: Cramer: How I find value stocks preparing to pop)
The $500 million trust loaned money to an unlisted coal company that later collapsed.