Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

By 2008 the immense dynamism of China’s domestic demand and its central position as a regional trading hub in East Asia suggested to some analysts that Asia might be on the point of “decoupling” from America and Europe.8 In the spring of 2008, as the rest of the world slid toward recession, Beijing’s main worry was that China’s economy was expanding too fast. Growth in consumption was roaring along at more than 20 percent per annum. The People’s Bank of China raised interest rates and government fiscal policy was tightened to choke off the boom. Meanwhile, China’s government machine was reorganized to concentrate responsibility for more balanced national growth in centralized superministries.9 What no one reckoned with was the sheer force of the global trade collapse. Whereas in July 2008 Chinese exports were growing by 25 percent, imports by 30 percent and FDI by 65 percent per annum, six months later China’s exports were falling by 18 percent, imports by more than 40 percent and FDI by 30 percent. It was an astonishing switchback. Even if net exports normally accounted for only a third of China’s growth, the impact was severe. In the fall of 2008 South Korean and Taiwanese corporations suddenly began to