At first, it seemed as if Beijing's state capitalists had found the magic recipe for endless growth. In 2009, they pumped €430 billion into building ever more modern highways, train stations and airports. Tax incentives led millions of farmers to purchase refrigerators and computers for the first time.
More or less on the party's orders, banks threw their money at the people's feet, and local governments were particularly free about getting themselves into debt. By the end of 2010, outstanding debt stood at 10.7 trillion yuan -- nearly a quarter of China's entire economic output.
Much of these funds went, directly or indirectly, into real estate construction. Local governments discovered that selling land for building made for a lucrative source of revenue -- and of collateral, so banks would continue to issue new loans. Thousands of farmers were driven off their fields so that villas and apartment buildings could be built.
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