Mike Cormack reviews China’s Great Wall of Debt by Dinny McMahon
Debt has replaced unbalanced growth as the great fear afflicting the Chinese economy. Following the 2008 financial crash, this is understandable: the figures are enormous, and often unparalleled. Between 2007 and 2014, Chinese firms went from owing a total of $3.4 trillion US dollars to $12.4 trillion. Tell-tale signs of financial distress resound, even when muffled by the damper of Party news management. And though the economy keeps on growing by a hefty 6.5% or so a year, the vast surge in debt over the last decade suggests an economic system with deep-rooted problems – from inefficiencies to misallocation of capital and irrational priorities, led more by political constraints than economic imperatives. Deciphering these signals is a tricky game: growth remains substantial (if the data can be trusted, which is also doubtful), and interested parties are working to minimize the impact of market realities as industries decline and fall in the global marketplace. The fog of economic war is thick and hazy.
In his new book China’s Great Wall of Debt, former Wall Street Journal reporter Dinny McMahon dissects the Chinese economy through the prism of debt.