China's Great Wall of Debt by Dinny McMahon

'The real significance here isn't the overall debt size, it is the pace at which it has accumulated. 'What the ghost cities were really about was local officials doing what they could to stimulate economic growth the best way they could – borrow and build quickly.'Ĭhina's debt-to-GDP ratio – about 280 percent – is bigger than the USA, Japan and many other developed countries, McMahon says.īut that's not the country's biggest worry. These 'ghost cities' sprang up because local officials were under pressure to keep economic growth bubbling away, he says. 'Chinese ghost cities were built from scratch and never managed to attract a fraction of the population they were built for.' 'At the same time, a huge amount of stuff has been built that isn't needed, isn't being used or the government-owned companies that built it will struggle to sell. Large cities in China – many of which are little known outside the country – now have multiple subway lines, sewerage works, eight-lane highways and decent housing, he says. Second-tier and third-tier cities have been transformed by the construction work that's gone on in the last decade.' 'A lot of what has been built has been incredibly useful. Since the Global Financial Crisis, China's economic performance has been underpinned by a debt-fuelled building frenzy – some of it good, some of it bad – McMahon argues.

That construction boom has taken up the slack after exports ceased to be the key driver of Gross Domestic Product. While living there, McMahon focused on deciphering the inner workings of China's financial system and the political economy which underpins it, and now his investigations have become the book China's Great Wall of Debt.ĭespite China's growing middle class, massive volume of exports and monumental infrastructure projects, the country faces a number of economic threats, he tells Kathryn Ryan, and it's unclear how it can be transformed by 2020 as President Xi Jinping has urgently requested.Īccess to debt has kept the Chinese economy powering along on all cylinders and allowed for the massive levels of construction, says McMahon, who now works for a China-focused thinktank in Chicago. Listen to the full interview with Dinny McMahonĬhina's opaque financial system is a mystery to most outsiders, says McMahon, who worked in China for ten years at The Wall Street Journal and the Dow Jones Newswires.

China's Great Wall of Debt by Dinny McMahon