Review of “China’s Great Wall of Debt” by Dinny McMahon
I have a very rudimentary understanding of Chinese government and economics, limited to knowing of its tremendous, consistent growth the last couple of decades, and the various consternations of American officials about what that means for the US’s role as the world’s only global power.
This book argues that the growth isn’t magical. It has been financed through debts by its provincial and local governments, whose leaders above all are judged by growth and social stability metrics. These local incentives and rampant corruption has resulted in ghost cities, overproduction of commodities such as steel and soy in which China has no natural advantage, a fragile financial system, and high inequality. The story it portrays is one in which the central government in Beijing has delayed a financial crisis and other side effects of its policies, but that eventually these effects will most likely come; the central government’s bet is that growth will continue to help paper over troubles and that it can reach “rich country” status before generational imbalances bring too much trouble.
Though I can’t evaluate how true the book is, it does serve as a counterweight to some narratives that seem to be especially prevalent nowadays. These narratives broadly contrast China’s high profile successes — high speed rail and infrastructure seemingly built overnight, or its investment in AI — with the US government’s inability to complete much smaller projects. They then imply that there is value in a supposedly technocratic and meritocratic, single party government over our sprawling democracy (especially with those in charge today…). This book claims that many of the same problems (corruption, short term over long term thinking, inefficiency/waste, and inequality) are present in the Chinese system — with little recourse for those on the losing end of the bargain.
The author itself seems knowledgeable; though he is Australian, he spent over a decade in China working as a journalist for the Wall Street Journal and Dow Jones News service. He doesn’t come across as overly-ideological, and the book has a good balance of illustrative examples and narrative explanations. However, it should probably be read as explanatory; at 285 pages, it’s a bit short to prove the claims it makes.