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GUY RAZ, host:

So, is China, as Bernard Baumohl put it, heading for catastrophe? For that, we turn now to James Fallows. Over the past two years, he's followed China's astounding double-digit growth in a series of quirky essays for the Atlantic Monthly. Those stories are collected in a new book, "Postcards from Tomorrow Square." And Mr. Fallows joins us now. Thanks for being with us.

Mr. JAMES FALLOWS (Correspondent, Atlantic Monthly; Author, "Postcards from Tomorrow Square"): My pleasure, Mr. Raz.

RAZ: You're in Hong Kong today, and you normally live in Beijing. Are you getting a sense that economic catastrophe is imminent in China?

Mr. FALLOWS: It certainly is the case that China faces a lot of big pressures. And one way to put this into perspective is that because the U.S. economy is still so much larger than China's, despite China's tremendous growth of recent years, it means that if there is a couple percentage points slowdown in the U.S. economy or consumer demand or demand for exports, that means a much larger proportional effect on the Chinese economy. So certainly everybody in China is aware that there is pressure on the export sector.

And I spent, actually, today in the manufacturing center of Shenzhen where a lot of these exporting jobs are located, and certainly times have changed from the boom of a year-and-a-half ago. But most people who I'm aware of in China view this as a challenge rather than certain implosion or explosion for what's been going on here.

RAZ: If there is one person Americans might want to pay attention to, it's a fellow you've profiled. His name is Gao Xiqing. And you've said that he essentially holds America's financial future in the palm of his hand. Who is he?

Mr. FALLOWS: His life story in brief: He's now in his mid-50s. When he was a teenager, he was working on a railroad gang during the Cultural Revolution. Then he was part of the cadre of first Chinese students who were allowed to apply for admission to college after the Cultural Revolution. He then, eventually, went to Duke Law School. He practiced at Richard Nixon's old Wall Street firm. He was a Wall Street lawyer. And then he came back home to Beijing to try to build, not rebuild, but to build their securities industry 20 years ago. And now he is the person who controls the largest part of China's dollar holdings around the world.

And so when Americans look at what's happened to stock markets over the last year or so, Mr. Gao looks at what's happened to the $200 billion he has mainly invested in the U.S. And he knows enough about the U.S. to talk as a kind of Chinese Dutch uncle, if you will, about how he thinks the U.S. should shape up if it wants to keep getting this money from China.

RAZ: So he is essentially in charge of $200 billion in U.S. cash.

Mr. FALLOWS: He is. And the collective Chinese funds are growing by about a billion dollars a day in the amount of dollars they are able to deploy around the world. So, more and more of the decisions about whether China will buy U.S. Treasury bonds, what kinds of assets it will think are attractive in the U.S. stock markets, and whether it will find dollars worthwhile in general versus euros or yen or anything else, people like Mr. Gao, and Mr. Gao in particular, are making these choices.

RAZ: Every second of the day, 24 hours a day, the equivalent of, you write, two 20-foot-long cargo containers are shipped abroad from China's ports, for example. How were you able to get your head around the sheer size of China and its economy and its changes? ..TEXT: Mr. FALLOWS: Something which is a predictable shock when you're traveling here is to come across a city that, at least in my case, I had literally never heard of before and find it has a population bigger than Los Angeles...

(Soundbite of laughter)

Mr. FALLOWS: Or bigger than Chicago. This happened to me in a coal mining town whose name is spelled Z-I-B-O in Shandong province. I hadn't heard of it, but it has a population of four or five million people. And you come across some rise in the road, and you see suddenly more buildings than you might see if you're looking at downtown Dallas. So, sometime I just hold my head and moan because it seems that the world is too big, but it also has been the real joy of being here since the summer of 2006 and just seeing things I had not imagined before I opened my eyes that morning.

RAZ: In a recent essay you wrote for the Atlantic Monthly, you talk about the Chinese as their own worst enemies.

Mr. FALLOWS: This is something which is, I believe, a feeling shared among many foreign correspondents in China. And it's very difficult to convey to our readers. And the simplest way I'd put it is that China, to me, seems to be a much better place when you're in it than when you're reading about it on the outside. When you're reading about it on the outside, all you read about are the latest political repressions, which are true, or the latest factory scandals or the latest poisonings or the latest natural disasters, and all those things are true.

And when the Chinese government is asked to explain them, it resorts to this Stalin-era agitprop, which makes things look even worse than before. For example, there are Communist Party officials who routinely refer to the Dalai Lama as, quote, "a jackal with a human face," and this doesn't really help in, sort of, worldwide PR. And so there is good as well as the bad, and I've been trying to explain both how that balance seems up close and also why the Chinese are so ill-equipped to explain it themselves.

RAZ: James Fallows is the Atlantic Monthly's national correspondent. His collection of essays on China, "Postcards from Tomorrow Square," has just been released. Mr. Fallows, thanks for being with us.

Mr. FALLOWS: Mr. Raz, my great pleasure.

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