Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

China had made itself into an export champion, but in so doing it had also fostered imports—of commodities and components from Australasia, the Middle East, Africa, the rest of Asia and Latin America, as well as technology and advanced machinery from the West. A large part of the value in China’s world-beating exports was accounted for by imported raw materials and subcomponents. As a result, net exports accounted for a smaller share of Chinese GDP growth before 2008 than one might imagine. In fact, no more than one third of China’s growth from 1990 was driven by exports, with two thirds coming from domestic demand.7 This was a very different balance from that of a truly export-dependent economy, of which Germany was the quintessential example. With slow domestic investment and consumption, the vast majority of Germany’s growth after 2000 was accounted for by foreign demand. In China, far and away the main driver of growth was its enormous wave of domestic investment. As China’s cities expanded and its infrastructure modernized at a staggering rate, the physical reconstruction of the country sucked the entire Chinese economy up with it.