Blind alleys

China and the Credit Crisis: The Emergence of a New World Order by Giles Chance;
John Wiley & Sons; US$19.95

The risk when tackling any subject related to China is the ever-present threat of scope creep – that is, where does one draw the limits on how far or how much to examine in a country with 1.3 billion people and 5,000 years of history? The selection of an appropriate and narrow enough lens, therefore, is crucial in constraining discussion to a sufficient level that a book can put forward its thesis without losing grasp of it along the way.

In writing China and the Credit Crisis: The Emergency of a New World Order, Peking University business professor Giles Chance chooses to conflate the inscrutability of China with the complexity of the credit crisis. As a result, his book doesn’t know when and where to focus its energies, instead scattering them in multiple directions and giving short shrift to the most important points.

Chance argues that China did not cause the credit crisis, but has emerged stronger as a result of it and more wary of the ways of the West. In his introduction to the foundation of the crisis, he finds time to explain issues from the free market roots of Margaret Thatcher and Ronald Reagan through to the repeal of the Glass-Steagall Act and the failure of Long-Term Capital Management.

Acquitting China of the crime is a fairly simple task, but one questions whether the time and energy spent on blaming what Chance sees as the true culprits might have been better spent focused solely on a more thorough examination of China’s role in the crisis.

Chance assumes that his reader has very little idea about economics or China, but for a book oriented toward the informed layman, Chance’s economic explanations are sometimes ungainly and even clumsy. For example: "A stronger Chinese currency, which makes Chinese imports cheaper and Chinese exports more expensive, allows a choice to multinationals that export product components into China and re-export finished goods from China to developed markets, to manage their prices to maintain their final end-market volumes."

The explanations of China are at points equally awkward and all-encompassing. Everything and everyone, from Edgar Snow to the Gang of Four, finds at least one mention in the book. Yet the wealth of historical references offer only occasional insight into the country, especially as they get lost in long and discursive paragraphs that desperately need to be broken up.

In one case early on, a single paragraph captures the experience of the Jews in China, Dr Joseph Needham, and the Cultural Revolution.

The book also occasionally feels padded with quotes, dedicating half-pages to minor points that could have been paraphrased in a sentence.

Flawed analysis

The rest of China and the Credit Crisis brings up more interesting issues, such as China’s involvement in the developing world and its push to end US dollar dominance. But Chance undermines his arguments with some questionable statements. In one case he describes Afghanistan and Iraq as "emerging countries par excellence," which draws into question his definitions of both "emerging countries" and "par excellence."

In another chapter, Chance states that "post-crisis, Chinese banks were stronger and larger than the American or European ones," which may be true based purely on market capitalization, but even on its best day, Industrial and Commercial Bank of China is no Goldman Sachs. This sort of statement also ignores the significant structural differences between China’s banking sector and those found in the West. Having the government operate as director, regulator and underwriter does little for transparency and good governance.

While the book serves as a decent introduction to the various moving parts within modern China, its greatest flaw might be a failure to acknowledge the fact that, as China emerges to fill a vacuum left by the US, the country faces ongoing and serious issues that threaten its own ability to lead. Though an adept learner and an increasingly powerful leader, it still has its own problems to sort out.

These problems span the socio-economic spectrum, from rule of law and official accountability to asset-price inflation cycles and overcapacity, yet China and the Credit Crisis passes up the opportunity to examine them in depth because it is too busy trying to discuss everything else.

WILLIAM WACHTER