Most media coverage of China focuses on its export and manufacturing prowess. Yet when I talk with visitors and friends just back from the country, what they most want to discuss is the bleak job market, especially for young people. For anyone who wants to understand China’s economy, Logan Wright’s new book, Broken China, is essential reading. Drawing on decades of on-the-ground analysis, it is rigorous in both its arguments and its evidence.
Wright argues that much of China’s extraordinary growth was driven by an enormous expansion of credit, particularly after the 2008 financial crisis. Much of that money went into property and infrastructure. As lending slowed and the property market collapsed, the debts remained. Rather than force troubled borrowers to recognize their losses, authorities have often kept them operating with more financing. Wright makes a compelling case that China has effectively experienced a financial crisis, just without the dramatic bank failures we usually associate with one.
One of his more interesting arguments is that China’s success in electric vehicles, batteries, solar equipment, robotics, and AI cannot compensate for weakness elsewhere in the economy. Wright estimates that from 2023 to 2025, the decline in property and infrastructure investment was roughly six times the increase in investment in newer strategic industries. These industries also tend to rely heavily on automation rather than large workforces. That helps explain why China can be a manufacturing powerhouse while struggling to provide suitable jobs for the 12 million to 13 million college graduates it produces each year.
China’s manufacturers have genuine advantages, but weak demand at home is pushing them to rely more heavily on foreign customers. Companies are cutting prices to win business abroad, putting pressure on profits and creating tensions with trading partners. This is an important distinction when assessing China’s prospects. Its growing dominance in critical supply chains represents real economic and geopolitical power, but that does not necessarily translate into a healthy domestic economy.
One point Wright makes is that China needs the rest of the world, too. Its control of critical supply chains gives Beijing leverage, but its dependence on foreign buyers gives other countries leverage of their own. The U.S. and Europe could use that opening more effectively by investing in alternatives and acting together.
