China's Great Wall of Debt

China responded to a drop in exports after 2008 by stimulating construction. 

When the 2008 financial crisis hit, China’s government looked for domestic economic activity to fill the gap left by its shrinking exports to the West. The state instructed its banks to turn on the financial faucets and ever since, vast amounts of cash have flowed into a Chinese construction boom. State-owned companies, helped by their close relationships to public banks, are quietly amassing huge debts. This stimulus strategy has worked so far; the Chinese economy powered through the post-2008 global slump.

The funds set the stage for the biggest construction boom in history. The need to counter the global downturn and house migrants from the countryside led to runaway building. In one telling statistic, between 2011 and 2013, China used more cement than the United States did during the entire 20th century. Another worrying factor is that China’s banking system quadrupled in size from 2009 to 2018. The initial justification for needing to create housing for internal migrants has in many cases gone by...