Customer Reviews

The Coming Collapse of China

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4 star:		(7)
3 star:		(7)
2 star:		(9)
1 star:		(41)

 

 

Remember the names? THE WARNING: THE COMING GREAT CRASH IN THE STOCK MARKET, Y2K - IT'S ALREADY TOO LATE, CONQUER THE CRASH, THE COMING CRASH IN THE HOUSING MARKET, PATRIOTS: SURVIVING THE COMING CRASH, THE COMING COLLAPSE OF THE DOLLAR AND HOW TO PROFIT FROM IT, and, of course, the greatest (and silliest) doomsday collection of all time, THE LEFT BEHIND SERIES. Doom will always have its day, Chicken Littles will watch and read and fret, authors and publishers will collect their take, and the unfilled prophecies of ruin will soon be forgotten in the wake of a newer batch. And thus it is with Gordon Chang's THE COMING COLLAPSE OF CHINA.

Published in 2001, Chang argues that China's deeply entrenched and long-standing economic difficulties, the Communist Pary's intransigence and desperate efforts at self-preservation, and the country's coming accession to the World Trade Organization (WTO) will combine to create the necessary conditions for revolution and overthrow. All that will be needed will be the right spark and the emergence of the right leader to take advantage. The thesis is, of course, plausible enough, but what doomsday prophecy doesn't have its elements of plausibility? Marshal enough arguments on one side of any issue and ignore the counterbalancing factors, and any situation can start looking like an imminent crisis.

This type of one-sided presentation is, unfortunately, precisely what Mr. Chang gives us. He is clearly knowledgeable about China, and he certainly identifies most of the country's major problems: bankrupt State-owned enterprises (SOE's), technically insolvent banks with huge quantities of non-performing loans, a ruling party lacking in ideas and the political will to change, a government addicted to creeping incrementalism out of fear of losing control, stifling of private enterprise and innovation, declining quality of life for millions of peasants, and the people's own access to information, and to each other, via the Internet. Yet at the same time, he either ignores or diminishes the importance of foreign investment capital, building of thousands of new factories, a seemingly inexhaustible pool of cheap and willing labor, the Chinese people's own rampant entrepreneurialism, and their enormous drive for material goods and a better life.

Chang's writing style tends toward the dry and overly repetitive, as if saying something often enough will make it so. His arguments are often perceptive, yet at the same time they sound heavily opinionated, lacking in substantive supporting detail or statistics. His writing is best when he humanizes it, telling us stories of individual Chinese people - more of this would have been better. `

Chang's book is also littered with odd inaccuracies and unfairly negative interpretations that left me questioning the merits of his bigger arguments. On the lesser side, for example, he incorrectly identifies pop singer A Mei (Zhang Huimei) as "Ah Mei" and describes internationally renowned architect I.M. Pei as born in Guangzhou. Pei himself says (in a June, 2004 interview in Archtectural Record) that he was born in Suzhou. Chang twice describes the White Swan Hotel in Guangzhou as "aging" and once as "dingy" - it is no such thing (I was there in 2002, 2003, and 2004). He also claims the Chinese government makes Westerners stay if they are adopting Chinese babies from Guangzhou - wrong on both counts. The babies come from all over China, and the adoptive parents stay at the White Swan because it is a five minute walk from the American Consulate where they will pick up their infants' American travel visas. More disturbing, he disparages Western companies' first mover advantage as nonexistent while ignoring the experiences of KFC, Coke, Pepsi, Nike, Polo, Budweiser, P&G's Crest and Pampers brands, Nestle's, and VW. Chang inappropriately equates China's 40% national savings rate as a vote of no confidence in the government, ignoring the lessons of decades if not centuries of historical experience and upheavals as well as cultural tradition (such as parents saving to buy a home for their son and his new bride). He also manages to describe Internet usage in China as "hobbled" even as it grew from October 1997 to December 2003 at a compound rate of over 100% per year!

THE COMING COLLAPSE OF CHINA is an informative book for those not familiar with China, as it offers good insight into the country's economic, political, and social systems and their shortcomings. The danger is that the reader will come away with a profoundly negative and pessimistic view of China beyond what the country warrants. Imagine the roles being reversed, with Chinese people reading about America's negatives (rabid political polarization, manufacturing job loss, staggering corporate frauds and bankruptcies,decaying infrastructure, broken health care system, low-functioning educational system, massive government budget deficits and trade imbalances, terrorism, gun crimes, religious fundamentalism), and you see the problem.

One might make a prediction or two about the fate of the world in the comfort of one's home, among one's close friends and family after a couple of stiff drinks and no one could care less about them in a day or two. Gordon Chang made the mistake of writing a book about his predictions of China so that for as long as he shall live, people could hold his predictions against him. This reader wouldn't really care about someon who thinks he knows a thing or two about China simply because he's of Chinese descent but for the fact that 10 years after the book was written, the collapse (which was supposed to take place within ten years from when the book was written) as predicted by the author still has not happened and the forecaster is nevertheless being interviewed by Western media as some China "expert".

China no doubt has many problems, some hidden from outsiders' view but some of the key predictions made in the book - China's economy was to be destroyed by its inefficient state owned enterprises, the Communist party was soon going to be overthrown by the people whom it rules with an iron fist, joining the WTO was going to completely expose China's lack of competitiveness and destroy its economy, and the internet was going to usher in an era of unprecedented free discourse which would eventually lead to democracy - have turned out to be completely wrong (and some to the detriment of China's people and the rest of the world). In fact, one would have trouble being more wrong making predictions about anything, including the weather and the timing of the end of the world.

Why was Chang so off? This reader's guess is that although he spent (and still spends) considerable amounts of time in China, he isolated himself in the elitist/intellectual/expat circle and really had little understanding of things happening outside of that small circle. For example, as much as Chang and other westerners may wish and believe, China's Communist Party enjoys popular support among the vast majority of peasants and the very poor. Call it ignorance and the result of brain-washing if you wish. It is also popular among the wealthy and the powerful who owe their recently found wealth and power to the policies and direct handouts by the Party. So the people who are truly unhappy under the rule by the communists are the still relative small middle class and the intellectuals (Chang's small circle of friends). So while the corrupt current regime may not be there forever, they are going to prove many western forecasters wrong for many years to come.

Also, Chang thought the lack of a credible belief system was going to lead the people to turn toward religions and cults en mass. He thought the Chinese could not become more materialistic than they already were. But 10 years later, the Chinese are at once more religious and more materialistic. There are thriving underground church communities, who are, contrary to Chang's prediction, not preaching violence or hostility against their government who in turn (again contrary to Chang's prediction) has for the most part tolerated their growth. At the same time, many Chinese, if not most, have made "a pact with the devil" agreeing to give up a substantial part of their personal liberty in exchange for greater material wealth. This reviewer is not suggesting that this scenario is a) preferred or b) will last forever but any forecasts of the communists' imminent demise are simply laughable.

And of course, nothing is a bigger slap on Chang's face than the miraculous growth of the Chinese economy over the past decade in direct contradiction to his forecast of a total collapse. This reviewer can't help but wonder what state of economic health Chang's in? If he is doing well then he must have either joined the corrupt elite or benefited from the government's liberal economic policies. For he could not have benefited from being a so-called China expert. This reader enjoyed reading his book, mainly from counting the mistakes Chang makes on every page.

China's economy or its government may one day collapse yet but their timing is surely out of the grasp of some intellectual light weight like Chang. Here is one last question: who is the bigger fool, Chang or the media outlets that hire him?

As an expatriate living in Hong Kong, I've had many opportunities to travel into China. I have seen many of China's flaws pointed out by Gordon Chang, like the absence of the rule of law and rampant corruption. Like the reader from New York, I would have liked to see Chang put more emphasis on these and other issues. Instead, Chang devoted about 300 pages to criticizing the Chinese Communist Party. This is not without justification, but Chang made it seem as if the CCP operated in a vacuum, with no outside forces involved.

Being a corporate lawyer, Chang was evidently reluctant to incriminate his own economic ideology by linking party corruption with the influence of multinational corporations. The latter, while no admirers of Communism, have been complicit in exploiting China's resources, impoverished masses, and lax labor and environmental laws for their own gain. Human rights were never part of the equation, and Chang conveniently left out Secretary of State Warren Christopher's 1994 plea to the American business community in China to pay some attention to this issue. (The plea fell on deaf ears.)

With the current wave of corporate scandals in the U.S. (sorry reader from Alaska, they're not exceptions to the rule), one may wonder if Chang should be examining his own country's problems instead of looking to the other side of the world. The reader from Alaska (sorry again) remarked how much of China's wealth was created by foreigners, while America's wealth was created by Americans. Either he sews his own clothes, or he goes half naked (not a good idea in Alaska). Where would America's economy be without China? Its clothes, army berets (gasp!), and 9/11 souvenirs (double gasp!) are made primarily in China! How can you have wealth if you don't have labor? Who provides the labor that produces so many of the products found in American stores? Guess who.

Chang went off the wall when he placed sole blame for the 1999 Chinese Embassy bombing in Yugoslavia and the spyplane incident in 2001 on the Chinese. Not a word on American errors, intentions, or double standards (i.e. the U.S. maintains a 200-mile security zone beyond its borders, not the international standard of 12 miles). How self-deceiving some Americans continue to be even when their own country is riddled with problems. They pat themselves on the back and congratulate each other for being "right".

For the record, China does have many problems, some of which are very serious. But Chang's book won't give uninformed readers a balanced treatment of the subject.

At a time when almost everybody is enthusing about China and its economic prospects, this is a sobering book. Chang argues that the economic and political system of the People's Republic is teetering on the verge of collapse; in 5 to 10 years after China's accession to the World Trade Organization (WTO) the whole house of cards will finally fall, and the Communist Party will be ousted from power in an eruption of violence. In Chang's opinion, neither the economic nor the political system can be reformed; the regime in Beijing will not win time during a slow process of reform ("crossing the river by feeling the stones"), but just make things worse as even more money is squandered by inefficient State Owned Enterprises and the corrupt Communist Party.

It is usually when people get overly optimistic and write books like "Dow 36,000" or "China as No. 1: The New Superpower Takes Center Stage" that things take a turn for the worse. Therefore, we should be glad that someone provides an antidote to the euphoria. After all, China and its 1.3 billion inhabitants produce an annual Gross Domestic Product (GDP) of just about the size of Italy's GDP. Italy has about 58 million inhabitants - and nobody considers Italy a superpower.

Gordon Chang's diagnosis is to the point. His prognosis, however, is debatable. After working for three years in Shanghai, I can only underline what Chang says about the sorry state of China's State Owned Enterprises and its banks. Doing business in China requires a good portion of sarcasm, and a lot of hope that despite the flaws in the system the whole state simply cannot collapse. In the words of a former executive of ING Bank: "The bad news is that the Big Four [banks] are insolvent; the good news is that they're sovereign." Chang's prognosis that China will collapse after 5 years because the country will honour its commitments to the WTO and open its economy to international competition is not very convincing. China will find ways to curb competition where it sees fit. Japan and the EU have been successful in protecting their agricultural interests for decades, and foreign banks have not managed to get a real foothold in the big Japanese market to this very day. In my opinion, the Chinese will be even more inventive in finding means to keep foreign products and services out of their country. No, the WTO is not the nemesis of Communism in China. Will the Communist Party be overthrown in a violent revolution? I would not bet on it. The Communist regimes in Eastern Europe went with a whimper (not a bang). Which will it be in China? I don't know. I don't pretend to know.

"The Coming Collapse of China" is an angry book written by the son of a man who "left China before the end of the Second World War and [the son] grew up hearing him say that Mao Zedong's regime would have to fall." The son returned to China to work as a lawyer in Shanghai. When he wrote this book - his first - it was a polemic in which he pounded away at the evils of Communism and predicted that Jiang Zemin's regime would have to fall. However, he would have written a better book if he had not tried to play the prophet (and defender of his father's faith). The best parts of the book are the stories in which he lets others speak for themselves, or when he pokes fun at the authorities. Unfortunately, he comes across as self-opinionated too many times. But don't let it irritate you: listen to the message even if you find the messenger annoying at times.

Gordon Chang's book on China gives an interesting but rather one-sided insight into various aspects of the China economy. The message you are likely to take home from this book is that the author believes that the Chinese people will stage a popular uprising and get rid of the Communists. The other 346 pages appear to have been written to support this belief.
Many Chinese state-owned enterprises are indeed not the most exciting credit risk on this planet, however, they are changing and those who cannot adapt will die. Similarly, the banking system leaves further room for improvement. Chang largely omits the changes the banking system in general and the Big Four banks in particular have undertaken in the last ten years, a process which should continue for at least another decade or two. Corruption is a problem, but there is nothing uniquely Chinese about it, and by itself it is not enough of a catalyst for a revolution.
That a transition from communism to a free market economy is causing all sorts of discontent especially amongst those who are not able to make that transition shouldn't come as a surprise. However, I doubt very much whether the `gasoline lake' (of discontent) Chang mentions is as large as he would like it to appear.

This book maybe a worthwhile read if you are looking for an up-date on various aspects of China. But you will notice that it is a single-issue book. A more balanced approach to the subject would have added more quality.

Having read this book only recently (almost three years after its publication); it is now much easier for me to comment where the author has got it wrong. However, as an Indian working in Singapore (and have worked in India earlier) and tracking China closely in the recent past has given me the perspective to see the fundamental weak points of his outlook.

Corrupt governance, inefficient state owned enterprises, rural poverty, separatist movements, non-performing loans, stumbling reforms process - Gordon Chang sees this in communist China while it also describes the condition in democratic India. You cannot lay the blame for this at the doorstep of communism as a political system, since a vibrant democracy like India suffers the same. All the same, both these Asian giants will undoubtedly be the engines of global growth for decades to come - either with government help or without. And as the communist party has smartly understood - economic performance can guarantee its survival. Though a market economy, Singapore is very much a one-party totalitarian political system with extremely restricted freedom of press and political thought. Yet, there is no need felt for political upheaval from the locals, who are mostly of "Chinese" origin. Though, the scale might be different, Singapore has shown that economic performance can allow the existence of benign totalitarian regimes. And China will perform economically! WTO has shown no apparent ill-effects. Yes, there are risks. Yes, there are growing economic disparities. Yes, there is still an ongoing process of painful readjustment. However, to translate that into a forecast of China's collapse almost smacks of "wishful" thinking on the author's part. All the same, if you want to balance the current hype over China's outlook where most unresearched articles gloss over China's systemic weaknesses, read this book ... but dont accept it at face value.

This book was published in 2001. Five years have passed and there is no sign that China is about to collapse anytime soon. The author was blinded by an inability to see substantial progresses behind the gloomy numbers he one-sidedly presented.

Take human right for example, do you know that there are now hundreds of thousands of advocates fighting for the right of ordinary people in China? If these advocates exist in the past, they would have just been thrown into "reformation camp" for years. Yes, nowadays these people are still harassed, but the harassments have become more "civil". What a consolation, you may say! Well, laugh at it if you wish. What I am trying to say is that we should not use an all-or-nothing kind of attitude when we look at China. As a matter of fact, many advocates would tell you that although they are harrased, the government is listening to what they have to say, and it does make essential adjustments based on these voices. Let's face it, the Hu's and the Wen's of China are probably much smarter than Mr Chang, and I venture that they probably care much more about the well being of China than Mr. Chang or you or I. The pragmatism of the current CCP government testifies to that.

Another example is that Mr. Chang's takes (a very brief one in the last chapter) on Taiwan, Tibet and Xinjiag are flatly wrong. He seems to have thought that Chen Shui Bian was a hero. But alas! Time has proved that Chen is a clown. For your information, his supporting rate has just dropped to an all time low (18%, George Bush must be happy that someone over yonder is doing much worse than he does) a few weeks ago and the pro-independence force is shrinking as the pragmatism of the now energized KMT wins over more and more rational people. As I write this review, the KMT and the CCP are holding a forum in Beijing and I have just read the excellent speeh of Lien Chan, calling for more interactions and cooperations between the two sides. Mr. Chang could not have dreamed of this in 2001. As the CCP likes to say, "the tide of history cannot be resisted." :-)

And finally, let's not buy too much into what the Falun Gong people have to say about CCP and China. Their agenda is clear: CCP is pure evil, bring it down at all cost. Well, these people are being consciously marginalized more and more by the mainstream Chinese societies in and out of China, because people do not perceive what they are doing to be beneficial to China. China (the people and the government) needs to be constructively engaged, not demonized.

Keep your eyes open, read more from Asian news medias, for they can provide a much needed counterbalance to the demonizing tendency coming from the West. It will be better if you can read Chinese, then you will get a really good balance based on which you can judge the true state of the affair yourself. If you only read the Gordon Chang's of the world, I feel sorry for you.

And by the way, forget about this book. If you really want to read it, do so with a critical attitude.

Then he can short all "red-chip" stocks tradable in Hong Kong and in NYSE in the form of ADS, and make a killing if his prognostications are indeed on the mark. The fact remains that nobody knows the future for certain, let alone the future of such a vast and intoxicatingly intricate country. Changs rare and interesting backgrounds -- an American-born Chinese who has spent 20 years in China -- have all the promises to make this book a must-read. But boy, what a total failure this book is.

Gordon G. Changs new book "The Coming Collapse of China" is full of ideological monologues and antidotal stories that he carefully chose to fit his premises. From time to time, Chang drifted away from them and embarked upon searching for facts and figures, which he is seemingly incapable of and ends up an embarrassing disaster. Chang stated:

"Deflation has gripped China for more than three years... Foreign investment stagnates. Corruption eats away at the fabric of the economy, and foreign currency flees the country."

Deflation has been plaguing the East Asian economies after the Asian Economic Crisis. While China is no exception, it has managed it better than its neighbors. Foreign Direct Investment (FDI) had remained flat between 1998 and 2000, but every other Asian countries wished that they had been China since they had seen rapid FDI declines -- never mind in 2001 the FDI into China is growing at more than 20%. Corruption is a major problem in China, but according to Transparency Internationals surveys, Chinas Corruption Perception Index has been improving. Finally, Changs statement that "foreign currency flees the country" can not even pass the tickle test -- in reality the foreign reserve and foreign deposits are increasing at a ridiculously fast pace.

Changs favorite numerical exercise is adding the known Chinese treasury debts, his estimated bad loans in major Chinese banks and the "pension obligations" together. The final number which according to Chang, stands at 146.7% of the Chinese GDP. Comparing that with the internationally recognized "safety mark" at 50%, he concluded that China was running out of money.

First, China is in the process of converting from a socialistic economy to a capitalistic one -- the state owns plenty of assets and is actively selling them off to pay down the public debts. Moreover, if Chang had used his rather unique methodology towards any other major economies, including the US and Japan, he would have concluded that ALL major economies are having too much public debts and ALL are running out of money. A bearish case has been made by some that the US public debts (including hidden "pension obligatations") are at 180% of the GDP. The fact is that the internationally recognized "safety mark" 50% is for treasury issues only. Even so, many developed countries have crossed it at one time or the other -- including the US in the past and Japan now.

If you really want to understand where China is heading, this book should not be on your reading list.

Go to Jamestown.org to read Gordon Chang professing his complete and utter ignorance -- slight exageration. Like all China experts (economists more or less excluded), Gordon Chang was trying to paint a picture of the place by viewing it through a straw.

I shouldn't rag on him too much. When facts repudiate his early analysis, at least he is man enough to retract his more egregious assessments.

So Gordon Chang gets 3 stars for sucking it up and being a man... but his book still deserves 1 Star.

With the most populous nation in the world now an official member of the WTO, a thorough analysis of some of China's structural problems, both political and economic, is perhaps more valuable than ever. Unfortunately, this book doesn't even come close to delivering. More often than not, it reads like a rambling monologue decrying the perceived evils of the current government interspersed with a patchwork of media reports and some sweeping opinions that are hardly supported by facts or thorough analysis.

In the chapter on State Owned Enterprises (SOEs), (using just one chapter as an example in the interest of space though the same shortcoming is evident throughout the book) the author makes many valid points about SOEs: 1) they waste valuable resources; 2) are soaking bank loans and crowding out lending to arguably more productive private enterprises and 3) the dislocation of millions of workers caused by dramatic SOE reform could be politically destabilizing.

To most professional, even some casual, China watchers, these problems are nothing new. Unfortunately, the author doesn't add too much more value than pointing out that the problems still exist. There is no discussion or analysis of how quickly the private sector must grow to absorb the workers shed by SOEs. The sprinkling of historical analysis hardly allows readers to put China's current problems and challenges into a historical context. How exactly did China get into its current predicament? What useful role, if any, might the Asset Management Companies (AMC) play in solving the bad loan problem? (AMCs are dealt with in a later chapter but still does not address this question.) How will the continued liberalisation of public equity markets affect SOEs and SOE reform?

There are some quite baffling conclusions not preceded by much reasoning. In quoting a HK-based economist who comments that "Once China has tackled the SOE and banking sector successfully, its pace of development will surprise the world", the author follows by stating: "That prediction is spot on, but when that happens, the [Communist] Party will no longer rule." How does that logic even follow? Later in the same chapter, the author writes "The rest of the world, which does not have to learn how to adapt Marxism to the twenty-first century, powers ahead, while China falls further behind. ... The issue is relative speed, and these days China is losing out." By what measure(s) is China "fall[ing] further behind" or "losing out"? GDP per capita? Total public debt per capita? Bad SOE loans per capita? How do you even come to such conclusions without even defining the benchmarks or parameters?

Timely with a catchy title this book might be, but well researched, cogently argued or clearly written it is definitely not. Anyone looking for a weighty, objective discussion and analysis of some of China's most immediate and daunting challenges will be best advised to look elsewhere. (...).