The trickiest thing about writing anything lively and persuasive about the Chinese economy is just how many interlocking problems there are. Nearly any one of them could trigger a cascading crisis. Beijing’s success or failure in reining in shadow lending, for example, will determine the future of the private sector, local governments and countless asset bubbles. A collapse in any of these could spread to the broader banking system or, perhaps worse, property markets, which affect just about every corner of the Chinese system.
Put simply, China is locked in a high-stakes game of financial “whack-a-mole,” with staggering geopolitical consequences riding on the result. To explain the risks embedded in any particular one of them, ideally you’d explain them all. But weaving together a complete picture in fewer than 2,000 words — without rendering it unreadable with jargon and cliche — is a skill I’ve yet to master.
In “China’s Great Wall of Debt,” Dinny McMahon does the trick superbly, albeit in a brisk 285 pages. It ties together nearly all of China’s lurking demons — from shadow banking to ghost cities to zombie firms — explaining the underlying forces and pathologies fueling their spread, as well as Beijing’s limited options for dealing with them without risking an overcorrection that only accelerates the arrival of a crisis. It’s peppered with insights, illustrations and anecdotes, and at times even delves into a sort of black humor befitting the depth and scale of China’s pathologies. I listened to the first half of it aboard a kayak during a long day of bass fishing, which speaks to its pace and readability rare for books on the subject matter. I liked it so much, I went back and read it again the old fashioned away.
Phillip Orchard, analyst
In the late 2000s, the U.S. energy industry transformed dramatically. Reacting to high oil prices and capitalizing on new technologies, energy companies invested heavily in shale oil and gas production to access reserves that had previously been considered inaccessible, embedded as they were in rock deep beneath the Earth’s surface.
In “The Green and the Black,” Gary Sernovitz compares the transformation to an Indian fable: A number of blind men touch different parts of an elephant and extrapolate from that touch what the entire specimen must be. All guess wrong, because without seeing or feeling the whole, it’s impossible to know what the specimen is. Similarly, it’s completely understandable that Americans, even those working in the energy sector, had no idea that the introduction of horizontal drilling and hydraulic fracturing would result in an energy revolution, even as U.S. oil and gas production increased markedly year after year. (U.S. shale gas production increased tenfold between 2007 and 2014, according to Sernovitz.)
Sernovitz counts himself among those unsuspecting Americans. He’s the managing director for a private equity firm focused on oil and gas and has worked in the industry for years. He, like many others, didn’t see the revolution coming. But his book doesn’t focus solely on how much has changed in the past 10 or 15 years. Nor is it a detailed description of what exactly shale oil is and how fracking works. (For more on this, stay tuned for an upcoming Deep Dive on the shale oil industry.) Rather, the book examines shale from five different perspectives: the industrial, the local, the financial, the global and the national. As the title suggests, many tend to make their final conclusions about the industry based on the perspective from which they view it. Environmentalists see it as incredibly destructive to the environment and risky for local populations living near shale wells; the oil industry sees it as an opportunity the U.S. would be foolish not to take advantage of.
At many points in the book, Sernovitz seems to have a foot both camps; as an oil industry insider who spent years living in New York City, he dreamed of a career in academia and spent six years as a struggling writer. He shares anecdotes about being confronted by people convinced of the dangers of shale and their alarm at his participation in the industry. “The Green and the Black” seems to be his attempt to reconcile both views, neither of which he falls into comfortably. It’s also a refreshing reminder that even those profiting from the shale revolution recognize its upsides and downsides.
Valentina Jovanovski, editor