Over three decades, China has steadily opened its economy up to the influences of markets to advance human utility. Over that period it has always been careful to try to avoid the financial excesses that overtake capitalism from time to time. On this basis, after the Global Financial Crisis, Beijing expressly eschewed the Western model of over-liberalisation and financialisation.
For instance, China was never so foolish as to let the Wall Street “vampire squid” loose in its mortgage market, as the US had done in the post-millennium period, resulting in the greatest mortgage bond and property price bubble and bust in history. Equally, China has been very cautious in freeing up its interest rate markets and currency, preferring to keep them largely under centralised control.
But, for all of its efforts, China found homegrown methods to blow its own, even larger property price and construction bubble after the GFC. In China’s case, it was more political than financial greed that was the key driver. The ruling Communist Party felt its legitimacy hung upon endless high GDP growth and the only way to deliver it was to build vast cities of apartment buildings whether occupied or not.
