To Westerners, China has always been a mystery. The huge population of very smart, hard-working people. The succession of unfamiliar, authoritarian governments. The sense that they’re playing the long game while we’re obsessed with quarterly reports – and that they’re laughing at our naiveté and lack of historical sense. We don’t get the Chinese, but we’ve always been impressed with them.
Never was this more true than in the past decade. While the developed world flailed around, trying to figure out how to pay its bills now that new debt no longer automatically translates into new paper wealth, China seemed to be the country that got it right. A dictatorship, sure, but a capitalist dictatorship, ordering its citizens around in the cause of economic development. Their numbers might be unverifiable, but one couldn’t deny the reality of all those skyscrapers and roads and power plants.
But now it turns out that China was behaving just like us, albeit more secretively, borrowing like crazy and investing more-or-less randomly. And, like us, they’re discovering that randomly investing other people’s money carries some risks. Two long articles that cover China’s plight in some detail were recently posted by Mike Shedlock and Automatic Earth.
In the meantime, here’s the short version:
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