Is This The Great Crash of China?

by Steve Keen at Forbes

China has achieved a remarkable transformation in the last 30 years—something that you can only fully appreciate if, like me, you visited China before that transformation began. In 1981/82, I took a group of Australian journalists on a tour of China on behalf of the Australia-China Council. The key purpose was to take part in a seminar with Chinese journalists under the auspices of the “All-China Journalists Association”. Given the unfortunate acronym by our Chinese hosts of SAPS—for the “Sino-Australian Press Seminar”—it was the first seminar between Chinese journalists and those of any other nation.

After the seminar, we went on a tour of China, taking in Sichuan, Shanghai, and Shenzhen. Shanghai’s skyline then was dominated by Soviet-style architecture—mixed with French and Chinese touches—and on the south side of the river, paddy fields stretched as far as the eye could see. On the north side, we saw furtive black-market trading of currencies as we strolled along the banks of the Bund.

Today, some of the Soviet-style buildings still exist on the north side, while the south side is an extravaganza of skyscrapers that turn on an impressive light show every evening. So capitalism has come to China.

Almost. The one thing China hasn’t yet had is a full-blown financial crisis. But the plunging Shanghai stock market has raised fears that that quintessential capitalist experience has finally arrived in China.

In fact, this isn’t the first time that Shanghai has crashed: it did so in 2008 as well. Then the index plunged by over 2/3rds in one year (see Figure 1).

Figure 1: The Shanghai Stock Market undergoes its second crash

All that changed after the financial crisis. In just 6 years, private debt grew by over 80% of GDP—and that’s using official figures as submitted to the Bank of Originally appeared at: