China Urged to be Wary

About 340 pages into Henry M. Paulson’s new book on China, a sentence comes almost out of nowhere that stops readers in their tracks.

“Frankly, it’s not a question of if, but when, China’s financial system,” he writes, “will face a reckoning and have to contend with a wave of credit losses and debt restructurings.”

Mr. Paulson, the former Treasury secretary, knows a thing or two about financial crises, having been the lead firefighter during the 2008 financial collapse, the worst financial crisis since the Great Depression. Mr. Paulson also knows more about China, its politics and the players behind it than most Westerners, having been the former chief executive of Goldman Sachs and one of the first businessmen to seek to establish ties with China more than two decades ago, regularly making trips to the country and befriending top officials.