For those who might want a more
balanced view of the reality, let me suggest Dinny McMahoin’s 2018 book China's Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans,
and the End of the Chinese Miracle. McMahoin
is a journalist and scholar fluent in Mandarin who has spent more than a decade
covering China’s economic and financial systems for the Wall Street Journal and for the Dow Jones News service, and he
knows what he is talking about.
One of the myths of the American public is that
authoritarian regimes like Russia and China have a tight grip on the entire
country. That might have been true under Stalin and Mao, but it certainly isn’t
true under Putin and Xi. In fact, Putin often complains about his frustration that
his instructions don’t get followed at the local level, complaints that don’t often
get reported in the American press. Similarly, China’s president Xi is clearly
fully aware of the fiscal time bomb he is sitting on, but he has trouble
controlling local authorities, who in China‘s corrupt system have every
incentive to ignore his instructions and follow their own agendas.
For those who would prefer a visual introduction to this problem
to reading a book, there are a number of good videos about this subject on
YouTube. One good one is a 25 minute video by Al Jazeera (in English) which can
be found here. (The End of China, Inc?)
China faces a number of serious demographic, economic and
social problems all at once, and Trump and his trade representative Robert
Lighthizer are well aware of this, which is no doubt why they think tariffs right
now will put serious pressure on China. Note that the real threat of tariffs is
not the tariffs themselves, which after all can be removed in a day, but the
fact that tariffs, if they remain in place very long, will incentivize companies
to relocate their supply chains permanently from China to other Asian nations
like Taiwan or Vietnam, which is a long-term loss to China’s economy.
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