Feature

China’s inevitable crisis

Subsidized companies keep building “unnecessary and unprofitable” factories, and government-directed banks keep pumping out money that will be wasted, said Michael Schuman at Time.com.

Michael Schuman
Time.com

I’m convinced that China’s “economic system is unsustainable,” said Michael Schuman. The country has achieved stupendous growth in much the same way Japan and South Korea did years ago, by using government funds and state-directed finance to steer the economy. But all those subsidies have hugely distorted the market, setting China up for a major meltdown like the ones that hit Japan in 1990 and South Korea in 1997. China is a wonderland of “excessive, misguided investment”: shoddy office buildings, malls without shoppers, a glut of solar panel factories, and high-speed railways that few Chinese can afford. Yet subsidized companies keep building “unnecessary and unprofitable” factories, and government-directed banks keep pumping out money that will be wasted. What’s worse, it’s all financed with debt, and government bureaucrats won’t change course for fear of dampening the country’s impressive growth figures. Both Japan and Korea suffered economic meltdowns “roughly 35 years” after embarking on their versions of this development model, putting China’s possible crisis around 2014–15. That’s not a firm prediction, but it is a warning that the clock is ticking.

Recommended

A surge in violence in Pakistan
The rubble of a Peshawar mosque damaged in a suicide bombing.
Feature

A surge in violence in Pakistan

The Adani Group scandal, explained
Gautam Adani.
Briefing

The Adani Group scandal, explained

China says it successfully cloned 3 'super cows'
5 cows lined up at feeding trough.
carbon copy

China says it successfully cloned 3 'super cows'

Japanese restaurants fight back against viral 'sushi terrorism' trend
Photo of Kura Sushi, a Japanese conveyor belt sushi restaurant chain
save the sushi

Japanese restaurants fight back against viral 'sushi terrorism' trend

Most Popular

The Hogwarts Legacy boycott controversy, explained
Hogwarts Legacy logo photo
Briefing

The Hogwarts Legacy boycott controversy, explained

Republicans oust Ilhan Omar from House committee
Rep. Ilhan Omar (D-Minn)
Punitive politics?

Republicans oust Ilhan Omar from House committee

U.S. firm offers Ukraine 2 Reaper drones for $1, plus $10 million in shipping
MQ-9 Reaper drone
Fine Print

U.S. firm offers Ukraine 2 Reaper drones for $1, plus $10 million in shipping