11/20/09 London, England – Last month, a Hong Kong apartment set a record. It sold for $56.6 million, which works out to $11,350 per square foot – the highest price ever paid for a pad in China. The buyer may have just needed a roof over his head. More likely, he is bullish on China. We are too, in the sense that we expect the Middle Kingdom to mature in wealth and power in the 21st century. But here’s a better bet: that China will blow up before it grows up.

China is a country of hyperbole. There’s scarcely anything you can say about it that doesn’t end with ‘est.’ In some ways, it is the world’s oldest society. In other ways, it is its newest. It is the world’s richest – with more than $2 trillion in reserves. It is also the world’s poorest, with some 200 million people who get by on less than $5 per day. It faces the world’s biggest problems too.

Even in its calamities, China is second to none. People inside the Great Wall were about as rich as people outside it, man for man, until the 19th century. Then, China missed the industrial revolution. Nearby Japan missed it too, but quickly corrected its mistake. It kept the barbarians at arms length, but still managed to pick their pockets. The Chinese, on the other hand, played it cool. The barbarians had nothing to offer, they believed. They still think so. Said Xue Chen of the Shanghai Institute of International Studies, just last week: “The US has a lot to ask from China. On the other hand, the US has little to offer China.”

In the early 19th century, traders from Britain and America bought porcelain (china), silk…Read more…