NPR Planet Money Podcast: Is China’s Economy Genius, Or Bound For Disaster?

When you walk around a big city in China, it feels like an entrepreneurial free-for-all — guys selling stuff on street corners, lots of little shops, everybody hustling. But when you pull back the curtain on the country’s economy, you find the government everywhere…

china economy

The government owns, among other things, the country’s biggest cell phone carrier, the three biggest airlines and the four biggest banks.Those state-owned banks in particular play a central role in the country’s economy.

Chinese people have one of the highest savings rates in the world, and they don’t have many options for investing the money they save. So they put lots of their money in ordinary savings accounts at those state-owned banks.

The banks, in turn, lend a lot of that money out to other government-owned companies, typically at very low interest rates. Those companies go out and build lots of new stuff. All that building contributes a huge chunk of China’s growth.

But the building can’t go on forever. In fact, China may already have built too much stuff with borrowed money.