Looking past the impressive growth rate, we reveal China to be a country balancing on an unhealthy level of borrowing and dwindling foreign demand. We ask whether the Chinese bubble might burst?
"They consume the lowest share of GDP ever recorded. It's not at all practical - it's not logical and it's not sustainable." In a city of bright lights and optimism, where everything seems to move at an impossibly fast rate, Professor Michael Pettis sees trouble ahead. He shows us a "ghost city" - a whole town in Inner Mongolia built from scratch, where row after row of apartment blocks, a theatre and a library, sit empty. It's a concrete example of China's "if we build it, they will come" mentality: state owned banks provide loans to more state owned companies who build and develop, paying taxes to local authorities - possibly where no demand actually exists. "You don't have an infinite capacity for borrowing", says Michael Pettis, "so one way or the other China will rebalance". But China seems undeterred. When the world economic crisis provoked a collapse in international demand for its goods, it responded with a massive $800 billion stimulus package. China's citizens are ever-optimistic, but could the country renowned for confounding the critics, for absorbing all economic glitches and charging ahead, finally get a wake-up call?