China: the bubble that never pops, by Thomas Orlik.

PositionBook review

Xi Jinping's Belt and Road Initiative - launched in 2013 with the prosaic ambition of funding infrastructure projects within and outside of China - has attracted two main critiques. Some saw it as an attempt to build neocolonial influence across emerging markets as US power waned. Others saw the failure of specific projects as further evidence of economic over- reach, already widely associated with Chinese ghost towns and bridges to nowhere.

To Thomas Orlik, chief economist at Bloomberg Economics, these responses amount to an acute case of what he calls "sinophrenia" - a condition of modern commentary that combines the belief that China will imminently collapse with the belief that it is taking over the world. It may be the sign of a first-rate intelligence to hold two contradictory ideas in your mind at the same time. But Orlik argues that both views focus so intently on their own version of the future that they miss what exactly is happening in the present.

As a result, a lightly professorial "yes and no" tone pervades this wide-ranging and nuanced survey of China's recent economic history which gently challenges the prevailing orthodoxy.

The book divides the country's reform-driven history after the 1976 death of Mao Zedong into distinct cycles: the opening of the economy under Deng Xiaoping; the period from the crackdown after the 1989 Tiananmen demonstrations to the 1997 Asian financial crisis; and the changes associated with China's 2001 entry into the World Trade Organization.

We are nearing the end of a fourth cycle, which began with infrastructure spending to counteract the effects of the 2008 crisis. The implication from these cycles is that China has demonstrated a continued ability to fend off crises, which casts doubt on fears of impending collapse. Orlik partly explains this resilience as the "advantage of backwardness" - China's economy in the mid-20th century dramatically lagged behind many other large nations and had more room to rise. He also suggests the country's policymakers are "more imaginative and flexible than their critics give them credit for". They have "faced down" the Asian financial crisis and the...

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