China: The Bubble that Never Pops

by Thomas Orlik

The Chinese economy appears destined for failure, the financial bubble forever in peril of popping, the real estate sector doomed to collapse, the factories fated for bankruptcy.

Banks drowning in bad loans. An urban landscape littered with ghost towns of empty property. Industrial zones stalked by zombie firms. Trade tariffs blocking the path to global markets.

And yet, against the odds and against expectations, growth continues, wealth rises, international influence expands. The coming collapse of China is always coming, never arriving.

Thomas Orlik, a veteran of more than a decade in Beijing, turns the spotlight on China's fragile fundamentals, and resources for resilience. Drawing on discussions with Communist cadres, shadow bankers, and migrant workers, Orlik pieces together a unique perspective on China's past, present, and possible futures.

From Deng Xiaoping's reform and opening to Donald Trump's trade war, Orlik traces the policy steps and missteps that have taken China to the brink of a "Lehman moment" credit crisis. Delving into the balance sheets for banks, corporates, and local governments, he plumbs the depths of financial risks. From Japan in 1989, to Korea in 1997, to the U.S. in 2007, he positions China in the context of a rolling series of global crisis.

Mapping possible scenarios, Orlik games out what will happens if the bubble that never pops finally does. The magnitude of the shock to China and the world would be tremendous. For those in the West nervously watching China's rise as a geopolitical challenger, the alternative could be even less palatable.

Genres: China, Economics, Nonfiction, Politics, Finance, History, Asia

238 pages, Kindle Edition

Published April 1, 2020

Reviews

[Federico Lucifredi · Rating 5 out of 5]

Stands alongside Kissinger's writings as the must-read to understand the current state of Chinese affairs. Orlik successfully argues that while China faces many challenges, it has a well laid-out growth path that it can navigate, following Japanese development blueprints and a steady leadership that is not afraid to learn from what the rest of the world did to navigate growth in the past.

[Stephen · Rating 4 out of 5]

This is a really useful book. It charts the financial history of China, from the opening up of the economy after the death of Mao, stretching out to the immediate near future. It is one of those books that serves a dual purpose. It is instructive on the future of the global economy and it is instructive on the future of China as a geopolitical entity. Or not, as the case may be.

The author divides the post-Mao period into a sequence of four cycles. Each is characterised by mistakes and the recovery from those mistakes. We are currently in the fourth cycle, according to the author. The first cycle started under Deng Xiaoping. It started with the increased use of markets and a general liberalisation of the Chinese economy. It led to a rapid expansion and growth in prosperity that culminated in a financial crisis in 1998. This was followed by the second cycle under the auspices of Jiang Zemin, that reformed the economy, squeezed out the hotspots - sometimes painfully, and paved the way for China to join the WTO in 2001.

China's accession to the WTO led to the internationalisation of the Chinese economy in the early years of the century. This allowed China to increase her share of global GDP by a significant factor. Under the stewardship of Hu Jintao, China grew to become of global significance. Then the global financial crisis struck. China fared reasonably well in this, but the Chinese counterparties didn't. Growth thereafter tended to be debt-fuelled, leading up to the correction of the Chinese stock market in 2015. So ended the third cycle.

The fourth cycle, under the guidance of Xi Jinping is one in which the public sector is constrained and the monetary authorities focus upon moral hazard. The plan is to de-leverage the economy without detonating it. It's a delicate balance that aims at rebalancing the economy away from investment to consumption and having a lesser on export led growth. The plan has gone well so far, but there could be problems ahead.

Probably the most interesting chapter for me is about wargaming a China crisis. From where might instability originate? The author points to recession in Chinese counterparty economies placing a squeeze on domestic income, the high levels of public and private debt, residential property as the best asset class for Chinese savings, and the vulnerability of the Chinese banking system to extensive bad debts - especially in the secondary and shadow banking sectors. This is a house of cards waiting to fall. The repercussions could be both spectacular and significant. This is the near term future that I find interesting.

I did quite like this book. The title captures the way I feel about the Chinese economy. We have been expecting a correction for many years, and that correction has not quite arrived. If it were to, the it would have systemic consequences in global supply chains.

The book is not an easy read. Much of it is necessarily couched in technical language, so a degree of acquaintance with the technicalities is needed before starting to read the book. Once you have started though, you will be hooked. The story follows like a narrative, much of which I have lived through, so I found it helpful to compare my recollections with the author's view. I thoroughly enjoyed it. If you can cope with the technical language, you would too.

[Hanz Löwe · Rating 5 out of 5]

The book is structured is such a way that each chapter is about a single President/Premier pair, the problems they faced, the initiatives they undertook and if they were successful or not.

The late economic historian Alexander Gerschenkron wrote that the path to a successful industrialisation is different for every country, because they lack the tool that previous successful countries used to succeed and they are subjected to different degrees and forms of "backwardness" and different institutions. The key to success therefore is the ability to substitute what they lack with what they have to solve a problem that is unique to their own situation. And it is therefore often that advanced countries fail to appropriately appreciate the policies employed by their "less fortunate brethren" that are often an odd mixture of imitation and "indigenously determined elements" and indeed the ideologies that accompanied them. And therefore what makes this book so great is the author's keen insight into the different situations facing China over the different periods, good understanding of why therefore certain policies were enacted and an unbiased evaluation of how successful they were. And I am especially appreciative of how he keeps his analysis free of the undue politics, which makes this work such a gem in these days.

Personally I am proud of how well informed I am about Chinese politics and economic policies, but this author is even more so, there was never a moment where I thought, "man, what an ignorant foreigner, talking about things he doesn't understand", instead I was quite taken aback by how well the dude understood Chinese politics and his ability to find sources to support his narrative. And actually I was very appreciative that I learned something, for example, why are the ghost towns alright. That is not to say his views are unique, on the contrary, they are very much in line with mainstream opinions in Chinese circles, but his book shines at being able to fully develop and verify the points with dazzling bibliographies at the end of each chapter.

I personally find the narrative a bit disjointed because of the structure of the book, but I understand why it is done that way. There is criticism on the Internet about the author's depiction of credit as a bad thing. And indeed there is little empirical evidence that suggest high level of debt is problematic to economic growth, but it is a worry that is shared even by the current Chinese government, and the debate is very academic anyway.

I highly recommend it to anyone who wishes to understand the economics aspect of modern china better.

[WiseB · Rating 5 out of 5]

The author's book is an equivalent to a post mortem of modern China (People's Republic of China) since the Mao era to the present ... based on his references to historical facts and data, he analysed the causes and effects of the four cycles of booms and busts that China went through during the leadership of Deng Xiaoping, Jiang Zemin, Hu Jintao and Xi Jinping.

Some worth mentioning points the author shared in the book include (a) China can, when it needs to, move with unity (Party plus state & private firms) of actions in market access, order placing, regulatory approvals etc. (b) China learned from Japan's success and missteps so as to grow through similar problems as faced by Japan's lost decade resulted by it's once bubble economy. (c) China is benefiting from the "advantage of backwardness" - a path to growth simply by following in the technology and management steps traced out by global leaders. (d) China is not crisis proof - potential triggers are a slump in exports, a plunge in real estate, overly ambitious reform, draconian tightening, market meltdown, capital outflows etc. (e) China, when facing a fast-moving crisis, is no better able to manage than governments anywhere else in the world. (f) China's policymakers are more imaginative and flexible at solving problems, while successful at creating and seizing opportunities.

[Austin Barselau · Rating 4 out of 5]

Tom Orlik’s “The Bubble that Never Pops” is an illuminating jaunt through the China’s recent economic travails, including its roots in the post-Maoist reopening period. Concise, but not short on detail, Orlik shows how China’s motive for development induced some unpalatable after effects, including a high debt burden, inefficient credit allocation, stultified state enterprises, and a misshaped housing market. China, despite its breakneck economic resurgence, suffers from “advanced economy levels of debt” despite it having developing country-levels of income. Orlik’s book shows how China’s rise will be economically encumbered as it enters the 21st century.

[Andy · Rating 3 out of 5]

Great book and describes things very well. This may be an unfair criticism, but i feel like the knowledge i got from this book have been repeated many times before in 10 youtube videos. This is a good one stop shop to learn about the bubble, but just watching a few 10 minute videos on youtube could have gave me the same amount of info

[James Hull · Rating 5 out of 5]

Great work on China's economic history. Covers a lot of material efficiently. Probably a must-read for anyone interested in China and what's happened there since Mao's era.

[Samsara · Rating 4 out of 5]

The author argues that China will get through this 4th economic challenge, by:
1. China GDP per capita is only 30% of USA. China still has a lot of room to grow out of the serious debt (4 times of GDP). Unlike Japan's 80's bubble, Japan was a very rich country already so cannot out-grow their properties bubble.

2. The 1.4 billion population makes a VERY attractive market that no weastern investment could resist. Foriegn companies are willing to trade their technologies and management know-how in exchange to access of China market.

3. The officials of China is a lot more creative in solving problem than they are being credited with. Remember they have get China through 3 economics crisis already and achieve the greatest wealth growth ever in history. Also, the centralized totalitarian government can get things done decisively and efficiently (particularly when compared the noisy, near-sighted, selfish and stupid Americans).

4. China is moving away from the capital intensive manufacturing into labor intensive service industry. More labor needed mean high salary to individual, thus more money to spend. Aas less saving also means more consumption, there will be a parallel reduction in the need for bank-financed investment. As the imbalances caused by a high savings rate unwind, the need for a high savings rate to guard against the consequences of those imbalances is reduced.

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Anbang was gaming China’s regulatory system, taking advantage of its status as an insurance firm to soak up cheap funding, and using that to go on an acquisition spree that appeared to have little commercial logic.

Anbang issued what looked like long-term policies, but with a low bar to cashing in early, the policies behaved like short-term investments.

Lehman Brothers’ funding was cheap until the markets decided they didn’t like its position in subprime mortgages; then it got expensive, then it disappeared. That’s why Lehman Brothers collapsed.

In a Chinese market where ‘financial repression’ kept deposit rates below the level of inflation, WMPs filled a gap - giving retail investors the safety and convenience of a deposit, but with markedly higher returns.

China’s central bank progressively raised the cap on deposit rates and lowered the floor on loan rates, before ultimately removing them entirely in 2016.

Instead of breaking the relationship, the bank finds a back-door workaround by inserting a shadow lender into the transaction. The shadow lender—typically a trust or asset manager— acts as a shell company, masking the true nature of the transaction.

In effect, the bank has made a loan. On the balance sheet, it appears as an investment in a security issued by the shadow lender.

For China’s policymakers, two lessons stood out. First, big-bang reforms came with unacceptable risks attached. Deng’s decision to pull off the plaster of government set prices in one swift movement had catastrophic consequences: spiraling inflation and social unrest. Second, an overheated economy had to be cooled down slowly, not doused in icy water. Chen’s retrenchment policies, and the resulting drag on jobs and wages, had added to the atmosphere of unrest.

Gorbachev’s mistake: attempting political and economic reform—glasnost and perestroika—at the same time. As a result, he lost control of the levers of power, losing both political control and his ability to fix the economy.

“We are deeply aware,” said Zhu, speaking to US magazine Businessweek at the start of 1994, “of the need to provide a soft landing for the Chinese people . . . if the growth rate were allowed to decline significantly, our social stability would be adversely affected, and if social stability were adversely affected, we would not be able to initiate reforms.”

For China, a closed capital account—with strict controls on any cross-border fund flows—meant immunity from speculative attacks.

Zhu aimed to nurture a core of major state-owned enterprises, creating globally competitive firms that could go toe to toe with General Electric, Siemens, and Sony. Smaller firms faced privatization, merger, or bankruptcy. For many of their workers, this meant unemployment.

The second target of Zhu’s reform was the banks. Even after the big-four commercial banks were carved out in the mid-1980s, lending was driven more by political than commercial considerations. State firms investing in line with national development plans got credit, even if the projects had little chance of delivering a commercial return. Zombie firms with no viable business model but a crucial role in keeping unemployment low got credit, even if they had no chance of repaying it. In such an environment, it was inevitable that banks would be plagued with low profits, high nonperforming loans, and an inadequate capital buffer.

The Chinese people must be provided with a soft landing; an overheated economy cooled slowly.

Asia’s meltdown would provide the catalyst for root-and-branch reforms of state-owned enterprises, a recapitalization of the banks, and entry into the WTO.

International standards on capital adequacy and strategic investments from foreign banks—both were a departure for a China suspicious of the destabilizing impact of global capital markets. Both were necessary, providing an international seal of approval as the banks prepared for listing on the global markets.

A country cannot simultaneously have a fixed exchange rate, free capital flows, and an independent monetary policy. That’s because capital flows to where returns are highest, so countries with an open capital account must accept either interest rates in line with the global anchor—the Federal Reserve—or a floating exchange rate.

China, characteristically, tried to stake out a position slightly outside the established rules. Instead of having two of the impossible three, they opted for a little bit of each. The yuan was managed but also reflected market pressure; capital flows were restricted but not banned; the PBOC moved rates independently of the Federal Reserve, but had to keep its objective of yuan stability in mind.

As a rule of thumb, loan rates should be roughly in line with the pace of nominal GDP growth—a proxy for the expected return on investment. If they’re too much higher, no one will borrow, hitting growth and employment. Too much lower and demand for credit will be too great, fueling inflation and asset bubbles. Deposit rates should be at least above the rate of inflation—otherwise, household savers don’t get a fair return and consumption suffers.

Borrowers could tap funds at way below their expected return. Savers were penalized with below-inflation rates. China’s economic structure was thrown off-balance, constantly at risk of runaway inflation and asset price bubbles, and with a worrying tilt away from consumption toward investment and exports.

With no easy options, the central bank allowed the pace of yuan appreciation to accelerate. A stronger yuan chokes off inflation by reducing demand for exports—increasing slack in the economy, and lowering import prices. As more rapid yuan appreciation drove more capital inflows, the central bank increased the share of deposits banks are required to hold in reserve, locking up the influx of funds before it could spill over into inflationary lending.

Savings have to show up as either capital spending or overseas sales.

Behind it all, however, were the one-child policy, the destruction of the iron rice bowl of welfare benefits, government-set interest and exchange rates, and socialist inequality that would make a capitalist blush. The result: savings at 51 percent of GDP looking for a place to invest, and all the stolen land and speculative bubbles that brings.

China had learned from the rolling series of emerging market crises in the 1990s—from Mexico’s “tequila crisis” in 1994 to the Asian financial crisis in 1997. These shared a common cause: a sudden exodus of foreign funding.

China would open to trade flows. It would not open its capital account or borrow from overseas. Instead, the People’s Bank of China (PBOC) maintained close controls on cross-border capital flows, and built up a store of foreign exchange reserves. As China’s exports expanded faster than imports, a bulging trade surplus should have meant pressure for yuan appreciation. Instead, the PBOC intervened actively in the foreign exchange market, buying up trade-surplus dollars at a policy-determined rate. Those dollars drove the increase in foreign exchange reserves,
The lion’s share of those reserves was invested in US Treasuries. Put a different way, China saved 51 percent of its income. Much of that savings it used as investment at home—some going to worthwhile projects, some wasted on roads to nowhere or evaporated in speculative bubbles. What was left it lent to the US Treasury.

The lion’s share of those reserves was invested in US Treasuries. Put a different way, China saved 51 percent of its income. Much of that savings it used as investment at home—some going to worthwhile projects, some wasted on roads to nowhere or evaporated in speculative bubbles. What was left it lent to the US Treasury. The consequence in the United States was bargain basement borrowing rates that fueled the real estate boom.

With China in a self-reinforcing cycle of saving and trade surplus, and the United States in a self-reinforcing cycle of borrowing and trade deficit, the foundations of the financial crisis were laid.

With China in a self-reinforcing cycle of saving and trade surplus, and the United States in a self-reinforcing cycle of borrowing and trade deficit, the foundations of the financial crisis were laid. When the mortgage defaults began, the system toppled and then fell.

Shadow banks abusing access to cheap funding to grow their loan books too quickly. They tried to use a general instrument—very high interest rates—to solve it. By spanking all the children for the misbehavior of one, they almost brought the financial system crashing down.

China’s combination of advanced-economy debt levels and emerging-market income levels is a unique disadvantage. Along with exports, credit is the fuel that powers the development engine. Borrowing pays for upgrades to industry and to infrastructure. China’s income level should mean it has years of catch-up growth ahead. By maxing out on debt at a middling level of development, China has made it more difficult to close the gap with high-income countries.

IMF counted forty-three countries where the debt-to-GDP ratio had increased more than 30 percentage points over a five-year period. Among them, only five ended without a major growth slowdown or financial crisis.
The economy has too much debt, taken on too quickly, and allocated by a deeply flawed financial system. Bad loans, unrecognized in the official data, are already high enough to pose a threat to stability. A shrinking working-age population, state-encrusted corporate sector, and wrong-headed policy agenda mean the chances of outrunning the problems are slight.

Li, at that time the Party secretary of Liaoning province, tracked bank loans, electricity output, and rail freight as proxies for growth.

A slump in exports, a plunge in real estate, overly ambitious reform, draconian tightening, market meltdown, capital outflows, or simply the inertial weight of zombie firms all have the potential to push China into crisis.

Part of China’s first bank bailout—ahead of the listing of the big-four state-owned banks—was financed with a sale of foreign-exchange reserves. What if a financial crisis forced China to recapitalize its banks on an even larger scale, and it raised the funds with a fire sale of its Treasury holdings? Would that trigger a financial meltdown, with the US dragging the rest of the world down with it? Maybe, and for that very reason, it’s not likely to happen. Facing a crisis at home, China’s leaders would hope for strong global demand to lift the economy out of its slump. A fire sale of Treasury holdings, triggering a crisis in the United States and potentially the rest of the world, would be counterproductive in the extreme.

As labor costs rose and consumer power increased, incentives tilted toward producing for China’s massive domestic market. Either way, foreign firms were ready to strike a bargain—access to China’s market in return for transfer of production technology and management know-how.

The combination of space for development, enormous size, access to foreign technology, and a ready-made blueprint for development gave China a major head start. On top of that, add a high savings rate, controlled capital account, and a state-owned banking system. As a nation, China saves almost half of its income; a controlled capital account means it’s difficult to move those savings offshore. As a result, the vast majority ends up in the domestic banking system. That’s important because it guarantees China’s banks a steady flow of cheap funding. And with the banks state-owned, that means government planners have a constantly replenished piggy bank for funding priority projects.

Moving mortgage rates and down-payment requirements, and shifting administrative requirements on who can buy a home, proved an effective way of modulating demand. Setting different requirements for first-, second-, and third-homebuyers added to the flexibility. China’s real estate sector has extreme cycles, but so far that refined set of instruments has enabled policymakers to avoid anything that looks like Japan’s meltdown or the US subprime crisis.

Reform-era China has been through three cycles. The first started with Deng Xiaoping’s decision to break with the ideological extremities of Maoism and ended with the student protests and conservative crackdown.
Reform-era China has been through three cycles. The first started with Deng Xiaoping’s decision to break with the ideological extremities of Maoism and ended with the student protests and conservative crackdown. The second started with Deng’s southern tour and ended with the Asian financial crisis. The third started with Zhu Rongji’s reform of the state sector and China’s entry into the WTO, and ended with the great financial crisis.

The generation born in the affluence of the reform era is more free-spending than their Mao-era parents and grandparents. The end of the one-child policy, aging of the population, buildout of the welfare state, and development of a more sophisticated financial system all pull in the same direction—increasing households’ propensity to spend, reducing their propensity to save. There’s a risk to lower saving; with less deposits flowing in, the funding base for banks will become less secure. But as less saving also means more consumption, there will be a parallel reduction in the need for bank-financed investment. As the imbalances caused by a high savings rate unwind, the need for a high savings rate to guard against the consequences of those imbalances is reduced.


5. The innovation of China that the whole country is on electronic payment means huge big-data is collected. This could mean some serious breakthrough that will bring China into some exciting new future. eg., credit check is so much easy now and can be made to each and every individual no matter how small the credit is. 1.4 million people add up into a huge credit / loan.

[Luciano · Rating 4 out of 5]

Good update on what happened in China since its opted for the way of capitalist enrichment and what kind of imbalances that process is generating. It offers no easy answers or predictions -- in that sense, it could benefit from going deeper into an economic framework -- but it's definitely an insider account worth reading.

[Darnell · Rating 4 out of 5]

This was the China book I was looking for, evaluating the evidence relatively dispassionately instead of pushing an agenda.

[Liu · Rating 3 out of 5]

This book is a basic and accessible overview of Chinese economic history, with particular focus on China's contemporary (2020) economic debt situation. Most mainstream analysis of China's economy is fairly doomer and Orlik provides a nice corrective to this. Many writers optimistic about China are wishcasting tankies, but Orlik is very fair in his acknowledgement of China's challenges and clearly spells out why he thinks China will overcome them. That said, reading this in 2024, the book has definitely aged poorly and showed that the author was a little over-optimistic. Orlik talks about the incredible success of China's Covid response (minus the cover-up), but he was writing before the brutal Shanghai lockdown. Ultimately, an estimated two-million Chinese people died of Covid and the government response triggered the largest nationwide mass protests since 1989. This isn't to say that China did worse than the US, but it's impossible today to say that the CCP's Covid response was super successful from either a public health or political perspective. In addition, China's real estate situation is looking much rougher than Orlik's prediction. The real estate sector remains extremely anemic, which is extremely crucial given that it makes up a whopping 30% of China's GDP. Finally, Orlik's prediction that the Chinese government would find a policy solution to its debt woes has yet to come true. There has been no progress made on local government or state-owned enterprise debt and both continue to grow, with many local governments making public pleas to Beijing for a bailout. This isn't to say that there won't be a creative policy answer to this in the future, but there is none on the horizon.

[Harshit Mishra · Rating 5 out of 5]

"Here, prudence arises from perception of power, both parties feel that other is more powerful. & here parties are Communist government & Communist Chinese ". One of the best books, examining the intersection of policy and economy for China, which offers scarce data for a clear picture of economy. Thomas Orlik brilliantly brings out the crises, response and impact, in an unbiased manner. No deep technical jargon but enough to keep one engaged & get the picture through.

[Kenny · Rating 5 out of 5]

Unbiased and knowledgeable

I bought this book at first because I read the author's comments on China's economy on Bloomberg News, and thought he possessed a rare fact-based, more objective point of view. This book did not disappoint me, according to which I finally have a logical explanation for so many things that have happened in recent years. The contents here are far more valuable than other brainless political propaganda against China.

[Ben · Rating 4 out of 5]

📌 Get Out Your Pins! 📌

This was a very good economics and politics book on China.

I really learned a lot. Which is saying something, because this is something like my 125th book on China.

Makes you think.

It seems the bubble is starting to erode, with things like the recent news about Taiwan, the housing mortgage issues, and the lockdowns.
Definitely a country to keep close watch on.

Would recommend reading!

4.7/5

[Walter Qian · Rating 4 out of 5]

Solid book that covers the history of China's financial reforms and current strengths and weaknesses. In the past 20 years, there have been a lot of predictions of Chinese financial collapse yet they've managed to overcome every crisis relatively unscathed. Orlik argues China's high savings rate and the inability for Chinese citizens to move money out of the country means domestic banks have a consistent and cheap capital. These state owned banks are able to loan money to state owned enterprises and regional governments during downturns at the CCP's commands which means there's always money for infrastructure and real estate projects. Also the Chinese government has proven to be strong policy makes with total control.

Really enjoyed the first half of the book which goes over the history of Chinese economic reforms in four phases that roughly coincide with the four post-Mao paramount leaders. He talks about how China dealt with Tiananmen backlash, Asian financial crisis and the Great Recession and how each leader cleaned up mistakes from his predecessor. Xi today is trying to deleverage SOEs from the post Great Recession stimulus. Orlik also seems to criticize Xi's strengthening of SOEs at the expense of the free market and thinks it's going to limit Chinese growth in the future.

Main criticism of the book is it's too short and concise. It covers a lot of ground real fast and doesn't provide enough supporting evidence for my liking. For example Orlik talks about how SOEs through "mergers, deleveraging and acquisitions" were able to boost productivity but glosses over how. It needs examples or at least statistics backing that claim. Very technical book that could have slowed down to help less informed readers like myself. I'm also not convinced Chinese debt levels are bad at it's current growth rate. I would've liked to see him bring arguments from other economists on both sides.

[Hrishi · Rating 4 out of 5]

This was an interesting economic history of China that I heard of because I fell down a rabbit hole of YouTube videos and documentaries about the Chinese economy and the Belt and Road initiative. and It was recommended to me as a good summary economic history of modern China and it delivered on that promise. I listened to the Audible edition (which I do not recommend because I did not care for the somewhat monotone narration). The author divides the history of China's rise into four cycles - the latest one being one initiated by Xi Jinping and consisting of a careful deleverage of the economy. It also asks the all important question of why China continues to grow as it does, despite many predictions of it faltering.

I thought it was a very interesting read, and while the book does not get into it much it does take into account the second order effects of massive social engineering efforts such as the One Child policy, media freedom, land rights, urbanization etc. I was disappointed it did not delve too much into the political factors at play (although it did talk about the interplay between the central and federated political entities. It does not mention human rights or the Uyghur question and its implications at all.

A great primer for anyone trying to understand China's economic miracle, although given that it is very much an opinion piece towards the end, I wouldn't recommend it be the only China-related input you go by!

[Andrew · Rating 2 out of 5]

What a difference five years can make.

I had put this on my reading list when it first came out but never got around to reading it until 2025. The title immediately captured my attention as I had written research back in graduate school predicting a financial crisis in China by 2010. Fifteen years later, and that financial crisis never seems to quite materialize. I was hoping Orlik might be able to shed insight into this phenomenon. Had I read this in 2020, perhaps I would have come away convinced the author was onto something. Now, as China struggles with deflation, massive property market pressures, post-COVID political discontent, and President Xi's decisive turn away from economic rationalism, the book comes off as outdated, out of touch, and facile. It is a cautionary tale about the dangers of trusting external signals within any authoritarian system and how difficult financial predictions can be.

Read more at https://znovels.blogspot.com/2025/02/...

[Eddie Chua · Rating 4 out of 5]

“For an economy as large as China, it’s never too late”. What a line to end this book, and very true as well, as it’s like a mini highlights of the 4 cycles of economic revolution since Deng Xiao Ping. At the end of it, comes a strong leader of Xi Jin Ping, to begin the next phase.

The Belt & Road Initiative and Made in China 2025, all big plans to expand on China influence and dominance in the region. As like 2 sides of the coin, each has its support as well as wary from those in the region. Nevertheless, the availability and access to resources (both sides) makes the RBI “too good” not to get onboard.

The debate will always continue about China’s autocratic rule, and western ideology on how to be. Yet, over the years, without the theatrics of elections (due to history and other factors), there is only 1 party rule, in which collectively are focus and driven on what to accomplish. Would that remain in future, I don’t know, though looks unlikely at the present moment.

[Carlos · Rating 4 out of 5]

Orlik manages to find a balance in pointing out the very real danger signs in the Chinese government’s management of its economy while also highlighting the many times they seem to pull rabbits out of their hats and prove their doomsayers wrong. He takes the reader through the multiple cycles of economic liberalization, critical points of mismanagement and surprising turnarounds that while never solving all problems do seem to give the Chinese Communist Party more time to deal with their reckoning. He points out both the strengths (quick decision making, whole-of-government approach) and dangers (lack of check and balances to catch policy mistakes, ease of overreaction) that mark the Chinese governance. He lays out both positive and negative scenarios for the future evolution of the Chinese economy and its impact on the rest of the world. Definitely an interesting read that begs to be updated to include the tumultuous years between its publication and the post-pandemic world.

[Sudhagar · Rating 5 out of 5]

One word - Brilliant ! Tom Orlik is not just someone who has the insider knowledge of the Chinese economy and its history, he's also a very entertaining writer as well. Orlik gives us not just the current state of Chinese economy but also describes the 4 cycles of the country's economy from Mao to Xi.
He provides details of key events and the responses of the regulators.

I can't think of any single writer providing such detailed and accurate view of the Chinese economy in English language. Most writers tend to take extreme positions - either the super bullish "China the future No 1" position or the super hawk line of "China is a bubble waiting to burst". Orlik analyses the issue in an impartial and data driven manner, naming China's strengths and weaknesses as well as potential risks. All in all, possibly the best business book of 2020.

[Dennis Murphy · Rating 5 out of 5]

China: The Bubble That Never Pops by Thomas Orlik is one of those books that capably describes China's economic reform, its vulnerabilities, and areas to improve. It is a book that deals with the impressiveness of China's achievements, its similarities to other economies (particularly Japan), and the ways in which the Communist Party has interfaced with it. The book is halfway between a survey and a more intermediate text, with some of what he says being rather obvious, while other elements would not be apparent unless you've taken some time to look into China in greater depth. I find Orlik's analysis to be mostly sound, and largely convincing - particularly toward the end.

If you've followed China's economy from a distance and now want to know more, this could very well be the book for you.

90/100

[Herman]

Pettis and Klein argue the source of China's economic issues stems from economic inequality. Due to artificially lowered investment yields, Chinese excess savings were redirected abroad towards dollar-denominated assets, perpetuating domestic income and price suppression, USD supremacy, and foreign demand for cheap Chinese labor.

High savings and low demand mean China cannot wean itself from an addiction to stimulus-driven growth. Low interest rates perpetuate investment-driven growth (infrastructure and real estate construction). Low yields and an underdeveloped financial industry drive household investments in the "bezzle" economy, creating mini-bubbles from red wine to real estate.

China's policymakers are also wary of U.S.-backed interventions, believing the Plaza Accord intentionally hamstrung Japan's ascendancy through an appreciating yen that destroyed its export sector. But 1980s Japan was also transitioning from an export-driven to a consumption-led economy, a transition that was bungled by the BOJ, which kept interest rates low to inflate the GDP. This stimulus-driven growth resulted in a historic economic bubble that presaged, but also paled in comparison to, the current Chinese economy.

Orlik belongs in the China-optimist camp, believing China can successfully deleverage through a combination of financial/economic resilience, technocratic ingenuity and authoritarian control. Others, however, might disagree with Orlik's sanguine views of China's bureaucratic competence.

While Orlik offers a cogent account of how Chinese policymakers have dealt with previous economic shocks, his thesis essentially states China is a "bubble that never pops" because it has never popped, an unsatisfying takeaway for readers in search of more insight than mere reassurance.

[Jake · Rating 2 out of 5]

I realised I was just reading this but not really taking much of it in. Plus this was written in 2020 (I think) and China is changing so rapidly that things would have changed massively by now. Sure, these are the things that happened that caused the events today or this year, but I couldn't really be bothered to finish it.

Suffice to say, it does look like the bubble has very much popped now. It is definitely game over.

All we can do now is wait to see what happens next. Because the Chinese authorities and government are unlikely to spill the beans on what is going on with their economy or real estate.

[Lily · Rating 4 out of 5]

It's fairly technical, but I think if you have some grasp of economic terms you can glean most of it from context. I read the book because I'm trying to learn more about economics and geopolitics in general, and I thought it was a very interesting and balanced discussion of the situation. I don't have any economic background but I feel a lot more informed about not just Chinese economics but fiscal and monetary policy in general, and my grasp of fundamentals is a lot stronger and more intuitive. So I think it was a good read in general for what I wanted to get from it.

[David Wagner · Rating 3 out of 5]

Sometimes, timing is _everything_. Orlik has succesfuly argued that many problems of China are of marginal nature and can be fixed and ARE being fixed.

Two years later, after zero covid, gathering world ire, complicated involvement in Ukraine war, disastrous heat waves and openly competing neighbouring countries lot of the argumentation is up in the air. Still a great book for better comprehension of some phenomenons (ghost cities), but from perspective of September of 2022 already obsolete. How quickly the tide turns.

[Peter Banachowski · Rating 4 out of 5]

This book gave me exactly what I was a looking for, which was kind of an introduction into the Chinese economy. It's a fairly dense read with lots of stats, so it's not for the feint of financial heart, but if you want a glimpse into the Chinese economy for a deeper understanding of their banks, real estate, etc, this is a great book. It'd be interesting for a follow up give this was published just before covid.

[Akash Parakh · Rating 4 out of 5]

Deep insight into Chinese Economic & Political history and thinking. Plausible, data backed conclusions and prospective analysis of the Asian hegemon. Page turning fluidity & 0 propaganda of any sort. Engaging & insightful, but as with all things Chinese, short shelf life as the pandemic may alter the equations drastically. And that is why 4 stars !

[Mariusz Bidelski · Rating 4 out of 5]

A good account of the history of China not imploding on its macroeconomic imbalances, frustrating China bears. Some interesting insights on why that transpired and might continue, but nothing especially ground breaking from my pov, I remain in the wait and see camp. The book is actually pretty short for the asking price, so I'd wait for steeper discounts or skip for now.

[Emma · Rating 5 out of 5]

Fascinating, nuanced. More insightful than the Nostradami that have been saying China was finished for the last fifty years, but not at all sugar coating the enormity of the debt problem that China currently faces. Gives more of an idea as to how the CCP are planning to handle the crisis, and how well their strategies have worked previously.

I suppose we will have to see!

[Nouvel Diamant]

Ich fand das Buch nicht so interessant wie erhofft / wie der Titel versprach. Vieles empfand ich fast als Missgunst und Wunschdenken, dass es China dann doch bitte bald ökonomisch (und gesellschaftlich...) schlecht gehen soll.

Ich würde auf Deutsch bspw.
China - der bessere Kapitalismus: Was der Westen vom Reich der Mitte lernen kann, und
Feindbild China
empfehlen.