"Financing the Middle Kingdom's recent building boom has been expensive: Estimates put local government debt alone at between $800 billion and $2 trillion, or around 13 to 36 percent of GDP. If the real estate bubble pops, financial and social crises will follow1."
Dr. Lynette Ong discusses succession of power in China to Xi Jinping and Li Qiejiang, as well as her economic outlook. She is emphatic that China's economic future – what takes China to the next level – will depend on its leader's political will to build out structural reforms, social institutions such as health care, education, and social security, if it wants to graduate more of its working class into bigger consumers, as it rebalances its economy in favour of domestic-led growth, and the introduction of 'rule of law' – NOT continued white elephant investment spending.
An in-depth insightful perspective - about 27 mins
Indebted Dragon, by Lynette Ong in Foreign Relations:
... The recklessness can be traced to two things: First, local Chinese officials are evaluated for promotions and other rewards based on how well the economy they manage performs. Construction and real estate activities are among the most straightforward ways to stimulate growth. White-elephant construction projects thus offer eager officials a perfect opportunity to impress their political superiors, even if massive developments do not necessarily make any economic sense. Take, for example, the city of Ordos in Inner Mongolia: Its elaborate urban infrastructure and its sea of new flats and office blocks are nearly all unoccupied, making it China's largest ghost city ...
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About Dr. Lynette Ong
LYNETTE H. ONG is Associate Professor of Political Science at the Munk School of Global Affairs at the University of Toronto. She is the author of Prosper or Perish: Credit and Fiscal Systems in Rural China.
