One of the most serious structural blocks to China’s smooth economic evolution is its four major state-run banks. They carry on their books some $300 billion to $400 billion—no one really knows how much—in nonperforming loans, and are thus technically insolvent. This debt is reported to equal roughly 30 percent of GDP. But the state, which controls the banks, continues to pressure them to make “policy loans” to state enterprises as a stopgap way of keeping workers from being laid off. As a result, the banks fail to assess risk as rigorously as outside commercial banks would. Fortunately, the savings rate of the Chinese people is 40 to 50 percent (in the United States it is only 1 percent), and because the banks retain something of a captive clientele in the absence of competition, they have an incomparable advantage over outside commercial banks. But shaky bank loans are hardly a recipe for success in an economy growing as rapidly as China’s.

The most logical alternate source of domestic development capital is the relatively new financial markets. However, the two existing stock markets, in Shanghai and Shenzhen, remain so poorly structured and regulated that they are unable to generate anywhere near the amount of capital China needs to continue developing. Although management is improving, widespread insider trading, inadequate regulation, official manipulation, and lack of fiduciary transparency mean that the bourses are as much casinos as reliable financial markets. Larger and more reputable Chinese companies that wish to go public seek listings on foreign exchanges.

Finally, there is China’s rapidly deteriorating environment and natural resource base. For starters, China now has twice as many people as it did 50 years ago, or approximately 25 percent of the world’s population, living on only seven percent of its arable land. Any road trip through China leaves a traveler dazed by the magnitude of environmental degradation caused by China’s development boom. Statistics present a grim picture:
• China is the world largest user of energy, with two-thirds of that use derived from relatively polluting coal with high sulfur content.
• It recently surpassed the U.S. as the largest emitter of greenhouse gasses.
• While per capita energy use is still only one-ninth that of the United States, China uses almost five times more energy than the U.S. and almost 12 times as much as Japan to generate a single dollar of GDP.
• Roughly 3 percent of China’s land mass is subject to acid rain, which also spills over to Korea, Russia, and Japan.
• Approximately 75 percent of China’s lakes and urban rivers are substantially polluted.
• The water tables in places like the arid North China Plain have plummeted, and entire major river systems have ceased flowing.
• The rate of desertification has doubled since the 1970s and continues unabated.
• Sixteen of the world’s most polluted cities are reported to be in China.
• Air pollution has become so severe that it reportedly causes some 300,000 to 400,000 premature deaths each year. (Indeed, residents of many major cities can go for weeks without ever seeing the sun.)
• The estimated cost to GDP from all this environmental degradation is estimated to be as high as 12 percent of GDP annually.

In short, China risks becoming the world’s industrial park—an outsource manufacturing dumping ground for the developed world’s most polluting industries. It can certainly show a short-term economic gain for its trouble. However, in the long term it may find that it has accrued a debt for which there will be no possible payment—a debt extracted not from a bank, stock market, or international lending agency but from China’s own patrimony of natural resources.

So how to begin reconciling the opposing parallel universes? There is no other way than to embrace their essential contrariness. After all, they are real parts of China’s spellbinding work in progress.

When considering contradictions, Mao was fond of proclaiming “the unity of opposites,” by which he meant that there is almost always a curious yin/yang relationship between seemingly opposing forces. Especially in unresolved situations, opposite things must be simultaneously admitted into evidence without either being discounted as untrue, or even less true than the other.

Due diligence on today’s China begs us to hold in our minds both the light and the dark. This is precisely what Mark Leong has done for us in his photographs. Through them, we see a China of opposites and extremes, neither of which is necessarily more real or more representative than the other. Both simply are, and both help compose a riveting but as yet unclear whole.

Our challenge is to understand that the die has not yet been cast for tomorrow’s China. Its future remains provisional and malleable. We as individuals and as a nation must do whatever we can to exert an influence on this impressionable and unstable nation in as constructive a way as possible. There is probably no relationship in the world today more important than that between the United States and China. Whichever parallel universe finally prevails will have enormous consequences for both us and the world.

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