The Coming Collapse Of China [Paperback]

The book maybe a worthwhile read if you are looking for an up-date on various aspects of China. But you will notice that it is a single-issue book. A more balanced approach to the subject would have added more quality.

This book should be required reading for companies that import from China, invest or plan to invest there, and those wanting to partner with Chinese companies. The book's many examples show that it is very risky to count on China for your future growth. Your position there is only as strong as your political connections at the moment. He who is on top now, may be on the bottom tomorrow. That part probably will turn out to be true even more true in the future. Be very careful!

Although Mr. Chang has lived in China for twenty years, it is hard to imagine that anyone can capture exactly what people there are thinking. Although his observations are surely based on reality, exactly how strong that reality is can be hard to determine from the book. Too often, the arguments come from a few examples, rather than systematic evidence. On the other hand, there may be no way to gather systematic evidence, even by those in power. For example, it does seem like religion and political dissidence are on the rise. But how deep is this trend? Anarchists were active in Russia for 20 years before the Russian Revolution, and were basically irrelevant to the final political result.

If China loses the race into high technology as Mr. Chang suggests, the country can still prosper by exporting lots of low technology products as it has done successfully in the past. The country is the world's most successful exporter to the United States. That basic strength is unlikely to disappear.

The challenges of unemployment and underemployment from the shutting down or collapse of state-owned enterprises are real ones. If the country opens its doors to foreign investment and lets its markets be freer, much of that can be overcome as well. The overseas Chinese can certainly fund an enormous amount of economic improvements in China, but will need to see a more dependable political environment before they do. Non-Chinese investors can also help. Certainly, the potential opportunity to invest in China looks better than Russia, assuming that corruption can be held in reasonable check. That's the wild card, because corruption now seems to be significant.

Communist regimes certainly have retreated around the world. The main question in China is whether the ideology will be abandoned by the party first, or the party will be abandoned by the people. Mr. Chang argues for the latter. I don't know enough to have an opinion, but a corrupt regime (as he describes here) may be flexible enough to change ideologies when the potential economic rewards are great enough. Time will tell.

It certainly does appear that a banking crisis will be hard to avoid. Such a crisis would trigger another currency devaluation, which would probably cause more Asian dislocations like we saw in 1997 . . . which would cause large financial tides around the world. His basic argument seems right that the rapid growth of the past was created by excess credit and mostly went into unnecessary capital investments. Countries just don't grow this rapidly without excesses of capital spending.

In many of the stories, I thought I was reading about other Asian countries in 1997. How will history repeat itself in China?

After you finish thinking about Mr. Chang's argument, think about where else your assumptions from what the experts have told you may be wrong. How can you choose a path that will allow you to prosper, regardless of what happens next?

Look for ways to unleash the benefits of freer association among all people!...