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FROM THE ANTHOLOGY: Tiananmen and After

Indebted Dragon

The Risky Strategy Behind China's Construction Economy

Construction workers install scaffolding on the top of a building in Shanghai. (Aly Song / Courtesy Reuters)

For four decades, the Chinese economy has grown by between seven and ten percent each year. It is the envy of the world, despite its relatively sluggish recent performance. Visitors to Beijing, Shanghai, and other major Chinese cities are quickly awed by impressive skyscrapers, glittering shopping malls, new highways, and high-speed rail lines, all of which leave the impression that China is a developed economy -- or at least well on its way to becoming one. Even in some smaller cities in inland provinces, government buildings make those in Washington and Brussels appear meager. In an area of Anhui Province that is officially designated an "impoverished county," the government office block looks exactly like the White House, only newer and whiter.

Underwriting the impressive facade, however, is an incredibly risky strategy. Governments borrow money

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