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January 8, 2013
The Chinese economy may be the envy of the world, but its impressive new development, from skyscrapers to highways, is underwritten by a risky strategy, warns Associate Professor Lynette Ong.
“Governments borrow money using land as collateral and repay the interest on their loans using funds they earn from selling or leasing the same land,” writes Ong in a recent lead article for Foreign Affairs magazine:Indebted Dragon: The Risky Strategy Behind China’s Construction Economy.
“All this means that the Chinese economy depends on a buoyant real estate market to keep grinding. If housing and land prices fall dramatically, a fiscal or banking crisis would likely soon follow. Meanwhile, local officials’ hunger for land has displaced millions of farmers, leading to 120,000 land-related protests each year.”
Jointly appointed by the Department of Political Science and the Munk School of Global Affairs (Asian Institute), Ong is a former An Wang Postdoctoral Fellow at the Fairbank Center for Chinese Studies, Harvard. Her research and teaching interests are in comparative political economy, the politics of development, politics of finance & public finance, fiscal federalism, climate change and environmental politics.
U of T News asked Ong to share a few details about her work, including her most recent book, “Prosper or Perish: The Political Economy of Credit and Fiscal Systems in Rural China” published by Cornell University Press.