Indebted Dragon: The Ponzi Scheme Driving China's Construction Economy

In Indebted Dragon, Professor Lynette Ong from the University of Toronto discusses how the Chinese economy relies on land as collateral to borrow money while paying the interest on the loans by selling and leasing the land. Ong notes this makes China susceptible to two problems: a real estate bubble and political instability stemming from displaced farmers who land has been taken from them. The subtitle to Ong's article is "The Risky Strategy Behind China's Construction Economy". I suggest "Ponzi Scheme" is a more apt description than "Risky Strategy". Let's take a closer look. For four decades, the Chinese economy has grown by between seven and ten percent each year. It is the envy of the world, despite its relatively sluggish recent performance. Visitors to Beijing, Shanghai, and other major Chinese cities are quickly awed by impressive skyscrapers, glittering shopping malls, new h...