A stunning inside look at how and why the foundations upon which China has built the world’s second largest economy, have started to crumble.
Over the course of a decade spent reporting on the ground in China as a financial journalist, Dinny McMahon gradually came to the conclusion that the widely held belief in China’s inevitable economic ascent is dangerously wrong.
In this unprecedented deep dive, McMahon shows how, lurking behind the illusion of prosperity, China’s economic growth has been built on a staggering mountain of debt. While stories of newly built but empty cities, white elephant state projects, and a byzantine shadow banking system, have all become a regular fixture in the press in recent years, McMahon goes beyond the headlines to explain how such waste has been allowed to flourish, and why one of the most powerful governments in the world has been at a loss to stop it.
Through the stories of ordinary Chinese citizens, McMahon tries to make sense of the unique—and often bizarre—mechanics of the Chinese economy, whether it be the state’s addiction to appropriating land from poor farmers; or why a Chinese entrepreneur decided it was cheaper to move his yarn factory to South Carolina; or why ambitious Chinese mayors build ghost cities; or why the Chinese bureaucracy was able to stare down Beijing’s attempts to break up the state’s pointless monopoly over the distribution of table salt.
Debt, entrenched vested interests, a frenzy of speculation, and an aging population are all pushing China toward an economic reckoning. China’s Great Wall of Debt unravels an incredibly complex and opaque economy, one whose fortunes—for better or worse—will shape the globe like never before.
Colorful characters and solid writing enliven what could have been an arcane discussion of the precariousness of China's economic miracle in journalist McMahon's debut. Though most outsiders believe Chinese economic growth is solidly founded on exports, McMahon reveals the truth: since the 2008 financial crisis, an increase of $12 trillion in bank debt is what has really fueled the Chinese economy. Moreover, many of those loans went to risky enterprises that may never be able to repay their debts, endangering not only China's but the world's economy. "For years," the author writes, "China's unimpeded ascent... seemed inevitable, but it's increasingly clear that that version of the future is unlikely." To back up his thesis, McMahon visits a factory housing the world's largest but largely idle closed-die hydraulic press forge; walks past empty shop fronts in one of China's "ghost cities"; and dines with a Chinese entrepreneur who's chosen to build his business in South Carolina because necessities such as power are cheaper there than in China. The book offers no verdict on this situation's likely resolution, leaving the reader only with the message that fixing it will require a level of "reform, pain and political leadership" of which China's government may not be capable.
Customer ReviewsSee All
Come for the debt, stay for the lesson on China’s government
Through anecdote and big picture McMahon draws a picture of one of modern China’s most daunting obstacles to becoming a developed nation. This is not a book for policy wonks or for in-depth analysis of the macro-economic impact of China engorging itself on borrowed funds. Rather, this book maps out the process by which the country finds itself in its current predicament while illuminating the endemic corruption, cronyism and vested interests that resist the economic reforms sorely needed to ensure that China does not also succumb to the middle-income trap like many of its Asian neighbors.
A fast, enjoyable read for those interested in learning more about how China’s economy works and its struggle to remain an authoritarian state as it tries to regain what it believes to be is its rightful place in the world order.