“Broken China
By Logan Wright
Polity, 272 pages, $29.95
During a visit to China in 1972 Henry Kissinger asked China's premier, Zhou Enlai, for his thoughts on the French Revolution. "Too early to tell," the enigmatic Zhou responded. Their exchange has long buttressed a conventional wisdom that says the U.S. thinks in electoral cycles while China thinks in centuries. Today's chaos in Washington, set against Beijing's five-year plans and tightly scripted plenums, makes China's defeat of the West appear inevitable.
China's leadership is not as farsighted as it would like to project. Zhou, it turns out, was likely referring to the 1968 protests in France rather than to 1789. And China's growth targets, hit with unfailing precision every year, now appear increasingly Potemkin-like.
Logan Wright offers a provocative and convincing perspective on China's economic trajectory in "Broken China." Mr. Wright, a partner at the research firm Rhodium Group, argues that instead of perfect planning, China's leaders have clogged China's banks and local governments with unproductive investments, consigning the country either to steadily decaying growth or to the painful process of economic restructuring and writing off nonperforming debt.
China's economic challenges have been well-documented. Michael Pettis and Matthew Klein's "Trade Wars Are Class Wars" (2020) noted the limits of China's consumption-starved, investment-led model. Recent accounts point to the implosion of the all-important property sector in 2021 and to plummeting consumer confidence after Covid-19.
Mr. Wright analyzes China's economic struggles through the lens of its financial system, arguing that the country's problems are bigger and more straitjacketing. In Mr. Wright's telling, China's original sin was an unprecedented expansion in credit beginning in 2008, when China "lent out the equivalent of the entire U.S. banking system's assets" in eight years, seeking to juice growth through increasingly uneconomic investments in local infrastructure and property.
Once China started reining in risky credit in 2016, beginning with its shadow-banking sector -- a network of institutions offering financing outside the purview of traditional banking regulation -- the wheels began to come off. Credit growth has fallen by half since 2017; fixed-asset investment growth for private firms has averaged 1.7% since 2020, compared with 12.3% from 2012-19. Housing construction ended 2024 down 69% from its peak in 2021, a grim milestone that took Japan 15 years to reach during its own property bust. Saddled with 150% of gross domestic product in central and local government debt, China can no longer increase growth by investing more, given the bloated balance sheets of banks and local governments.
China's real-growth rates are therefore dramatically lower than those touted by Beijing. Against the official 5% GDP growth rate in 2025, Rhodium estimates that true growth was between 2.5% and 3%; this year it may come in around 0%. Far from statistical quibbling, this battle over growth rates is central to geopolitical competition, Mr. Wright argues: China is tetchy about growth statistics precisely because they are vital to Beijing's narrative of its "inexorable rise." The more that other countries believe China will surpass the U.S., the more likely they are to align with Beijing.
Slowing domestic demand, while Beijing continues to subsidize manufacturing, is also fueling a flood in exports as China's growing industrial capacity needs to find buyers abroad.
In automobiles, domestic sales have declined 20% this year while exports are up more than 60%.
China's surging trade surplus of more than $1 trillion last year is therefore both a policy choice and a necessity: China seeks to hook the world on its exports but is increasingly dependent on global consumers to keep its economic engine running.
"Broken China" provides a useful complement to the breathless focus on China's industrial and technological prowess epitomized by such books as Dan Wang's "Breakneck" (2025). In "Apple in China" (2025), Patrick McGee vividly describes how China harnessed Apple to turbocharge the country's own advanced-electronics industry. But Mr. Wright argues that China's impressive advances in areas such as electric vehicles, robotics and artificial intelligence can only take it so far.
Its "new three" industries (EVs, batteries and solar panels) account for less than 10% of China's GDP, compared with the 23% to 27% of GDP for "the property sector at its peak" and 14% for "local government infrastructure investment." Industrial advancement that is dependent on foreign rather than domestic buyers is a recipe for global pushback and a growth model that drafts behind foreign growth rather than surpasses it.
Whether Xi Jinping is ultimately comfortable with sacrificing the long-run health of China's economy for the current path of technology advancement and export dominance is a question Mr. Wright leaves underexplored.
"Broken China" undercuts the notion that China is an economic rival that may outstrip the U.S. in overall heft -- in fact, the U.S. likely outgrew China over the past five years, according to Mr. Wright.
More concerning is the threat of Western deindustrialization in advanced industries and the weaponization of China's supply-chain dominance in areas such as rare earths.
A coordinated pushback against Chinese exports would stifle Beijing's ambitions.
This should give the U.S. and its allies confidence. Assuming China continues to put off the painful restructuring necessary to bolster domestic consumption, its dependence on the West to fuel export-led growth will outlast the West's acute dependency on Chinese exports in areas such as minerals -- as long as the West keeps investing in alternative supplies. Most importantly, the U.S., Europe and Japan -- out of shared interest -- should work together to defend against the flood of Chinese exports.
"Broken China" forces the reader to ponder the long-term sustainability of China's unbalanced and deteriorating economic model -- precisely the farsighted view that has been absent in Beijing.
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Mr. Bunzel is the head of Lazard Geopolitical Advisory. He has worked in the political section of the U.S. Embassy in Moscow and at the U.S. Treasury Department.” [1]
China is producing advanced technology; the world is buying it. Global West is left behind, looking from sidelines, and split. USA is not buying and staying left in 20-th century, both unhappy consumers and ossified companies. This is a path to get completely killed by competition. EU is still buying and complaining that China’s wares are too cheap, impossible to copy for competition. EU consumers are happy, EU companies – not so much.
To keep itself busy, Western countries started an expensive program of militarizing economy without ability to scale production of rare earth needed for war ready numbers of precise drones and missiles. This is a real Potemkin-like action, huge open-air theatrical production.
The gap between high-level defense funding and the actual constraints of raw material supply chains is a critical focus of modern strategic analysis. Western efforts to ramp up military production face severe bottlenecks due to a heavily centralized global supply chain for rare earth elements (REEs) and critical minerals, making rapid scaling a complex industrial challenge.
To cover from the public a purely performative "Potemkin" effort, defense analysts describe this situation as a structural lag between committing financial capital and building physical infrastructure.
The Scale of the Supply Chain Bottleneck
The primary challenge in scaling up the production of precision guided munitions (PGMs), drones, and advanced missiles stems from deep-seated vulnerabilities in the material pipeline:
• Monopolized Processing: While raw rare earth deposits exist globally, China controls roughly 60% of mining and nearly 90% of the refining and processing capacity for these elements.
• Defense Reliance: Modern precision weapons are deeply reliant on these materials. For example, every advanced missile, radar system, and precision drone requires powerful permanent magnets made from neodymium and dysprosium, alongside specialized optics using lanthanum.
• Lead Times: Building a fully operational rare earth mine and its accompanying chemical processing refinery typically takes 7 to 15 years due to environmental regulations, specialized engineering requirements, and high capital barriers.
Strategic Capital vs. Industrial Capacity
The friction the Western economy is experiencing highlights a fundamental mismatch in industrial mobilization:
• Financial Mobilization: Budgets and procurement contracts can be authorized relatively quickly by legislative bodies.
• Physical Mobilization: Rebuilding a domestic industrial base requires skilled labor, specialized manufacturing tooling, and chemical processing facilities that cannot be produced overnight.
To mitigate this, Western nations have begun investing in alternative supply chains—such as expanding domestic processing facilities (like Mountain Pass in the US) and forming international partnerships (like the Minerals Security Partnership). However, until these processing facilities are fully operational, the capacity to output "war-ready numbers" of high-tech drones and missiles remains constrained by raw material availability.
So instead of discussing the reality, Potemkin you go. Give the money, there are people always ready to grab the money. In Biden’s case these people were trade unions of people who don’t know what they are doing. In Trump’s case these people were companies that don’t know what they are doing.
1. A Mirage Of Growth. Bunzel, Theodore. Wall Street Journal, Eastern edition; New York, N.Y.. 04 Nov 2026: A15.
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