In 1972 Henry Kissinger asked China's premier what he thought of the French Revolution. "Too early to tell," Zhou Enlai said. The line became proof that China thinks in centuries while America thinks in election cycles. It turns out Zhou was probably talking about the 1968 protests. And China's leaders, a new book argues, aren't as farsighted as they look.
Logan Wright, a partner at the research firm Rhodium Group, makes the case in "Broken China." The reviewer, Theodore Bunzel of Lazard, calls it provocative and convincing. Wright's story starts in 2008. Over the next eight years China lent out the equivalent of the entire U.S. banking system's assets, pouring it into local infrastructure and property that earned less and less. When Beijing started reining in risky credit in 2016, the wheels came off.
The numbers behind the slogan
Credit growth has fallen by half since 2017. Private fixed-asset investment has grown 1.7% a year since 2020, against 12.3% from 2012 to 2019. Housing construction ended 2024 down 69% from its 2021 peak. Japan took 15 years to fall that far in its own property bust. With central and local government debt at 150% of GDP, China can no longer grow by investing more. So the official numbers, Wright argues, are inflated. Against a reported 5% for 2025, Rhodium estimates 2.5% to 3%. This year may come in around 0%. He says the fight over growth statistics matters because China's story of an inexorable rise is what pulls other countries toward Beijing.
Weak demand at home plus subsidized factories means a flood of exports. Domestic car sales are down 20% this year while exports are up more than 60%. The trade surplus passed $1 trillion last year. The celebrated new industries, EVs, batteries and solar, are under 10% of GDP, against 23% to 27% for property at its peak. The book argues the U.S. likely outgrew China over the past five years, and that a coordinated pushback on Chinese exports would stifle Beijing's ambitions.
Our read
This is an Investments and Risk story, module IN04. It lands the same week Beijing told its brokers to slow new stock listings. Its market has dropped more than 20% from its June peak. Our model books don't hold Chinese stocks directly. The exposure most families have is quieter. It's in the international index fund inside a target-date fund, and in the sales of American companies that sell there.
Here's the check this week. Open the fact sheet for your international or emerging-markets fund and find the China weight. In many emerging-markets funds it's the largest country by far. You don't have to sell anything. You just have to know that a slice of your retirement plan is a bet on the official 5% being closer to true than the 2.5%. The second check is for people who own individual stocks. For each one, look up the share of sales that comes from China. A Journal analysis this week found Chinese companies give foreign investors less information than local ones. That's a reason to size the bet small, not a reason to panic. Fifteen minutes with those two fact sheets is enough to know what you own.