China’s business model of building for the sake of building constitutes one of the largest misallocation of capital the world has ever seen, one 30 years in the making. The government has traded its citizens’ standard of living for buildings, pollution, and power. In a gigantic feedback loop, the government is rewarded for the misallocation with widespread admiration for it’s GDP growth with investments from foreign companies, but an economy dependent on construction, cheap currency, duped investors, and an obedient society willing to sacrifice a commensurate standard of living. However, things are beginning to unravel. The property bubble is beginning to prick with volume off 80% since April, says the head of the leading Chinese residential brokerage firm. Demand for exports are falling, political risks from the US and the world are increasing, suicides are making headlines, and workers are striking. ”The probability of social unrest and the level of intensity of the violence are directly proportional to the dependence of the citizens upon the state for their well-being,” notes Fred Jones of Jutland Capital Management, and there is no major economy more dependent than China on economic central planning. Perhaps “this time is different” and a centrally planned economy reportedly directed by 25 people has it all figured out. Or perhaps, as with the Olympics, the rest of the story has not been told.