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What Reasonable People Say About China’s Economy.

By Dan Harris on Posted in China Business

Just saw this quote on China’s economy and liked it so much, I’m going with it:

“The reasonable bulls and bears among us agree on most of the facts,” Northwestern’s Shih said. “But at the end of the day, we disagree on the Chinese government’s ability to make tough changes.”

It’s from an LA Times article, entitled, “Predictions of an economic collapse in China are in vogue,” which says that the pendulum has swung so far regarding China’s economy, that the gloom and doomers may actually have gone too far.

I do find that most people agree on the shortcomings inherent in China’s economy and the dispute centers on whether the Chinese government can fix it enough for it to muddle through or will it fall off into a full-fledged tanking. What do you think?  I think that if the worldwide economy picks up and if China does not move too far away from being the place for cheap goods, it will make it. Otherwise, I too have my doubts. Et tu?

  • http://rudenoon.com/absalletc/ jg

    I’m surprised that the ‘boom’ has lasted as long as it has. That it’s coming down while Hu is still at the wheel is weird justice. A staggering dearth of ideas accompanied by the persistent official narrative of victimization are at the root of China’s problems. If the economic situation gets a lot gloomier I fear what the ‘boys’ will do to refocus the rising anger. They’ll reach into their nationalistic bag and grab some old, worn-out solution that will, in the end, make things worse. The Party’s inability to correct itself has put the country in the path of what may end up being the 21st C’s first big runaway train. Watch out for Bo Xilai and his red revolution. He’s already rummaged through the bag and chosen the ‘Mao’ revision rags – different suit, but the same old stuff. Ughhh.

  • http://Www.inpraiseofchina.com Godfree Roberts

    The Economist has predicted a “hard landing” for China’s economy 86 times in the past 28 years.
    The US economy boomed for decades without significant exports and the Chinese economy has vastly further to go than had America–even in gross terms like rail trackage laid.
    The Chinese are smarter than us (Kissinger), more realistic about money, more cooperative with one another, more patriotic, more ideologically flexible, and better governed than we ever were.The trust and approval that the Chinese people bestow on their government (Pew) is stratospheric, and rightly so.
    Our lack of understanding of Chinese history and culture is almost total. It is matched by our wilfull misconception of the Chinese model. Its banks, for example, are public utilities, as is its Reserve Bank. Gosh! D’you think that might make a difference?
    I could go on by, for example, pointing to Premier Wen’s intimate familiarity with Smith’s Theory of Moral Sentiments (merely as an indicator of ChiGov sophistication) but I’ll simply point out that Western media is horrified by any government that is control of its country’s capitalists and actively maligns it with baleful predictions and, wherever possible, outright lies.

  • http://www.iqidu.com Mao Ruiqi

    In a word, “population.” It is a marketer’s dream-scape. In contrast, however, making all difficult issues into virtual impossibilities, a realist’s worst nightmare scenario actualized.

  • MHB

    We can agree that China’s economy, government, society and place in the world cannot easily be matched to historical predecessors. The past is not a good predictor of the future. Making predictions based on present evidence requires the use of a model which was developed to fit evidence collected from elsewhere in the past.
    Predictions of China’s economic downfall are misnamed – they are prophesies. It may very well happen, and maybe before too long. Talking about whether or not it will fail is not particularly helpful – better to focus on the actual developments (as this blog regularly does) – look at how the markets are changing, not simply up or down and how much.
    China’s economy is not based on market sentiment in the same way that Western ones are. Sure, speculation is rife, but the high level of government control and state industry can act as a counterweight – prophecies will be less likely to be self-fulfilling.
    If the world economy picks up, China will have enough income to enter another phase of development. The picture is much rosier for China than for most other countries.

  • David A

    That is a great quote. Thanks for running this.

  • dan (another Dan)

    At least Godfree is candid. Indeed, his ” lack of understanding of Chinese history and culture is almost total” matched by his “willful misconception of the Chinese model.” (whatever that is).

  • Twofish

    What I find rather amusing is how quickly people go from “China is going to rule the world’ to “China is totally doomed” in a matter of months and back again.
    For that matter I’ve lost track as to whether Europe is doomed or not. That seems to change every day.
    One other weird thing is that people seem always like dramatic scenarios. One thing that I haven’t heard is the possibility that China (or Europe or the US) will just muddle through.

  • http://china-meiguo.blogspot.com/ David Moser

    I’ve been living in China for a year and a half and while I don’t claim to be smart enough to predict when there will be a crash or major downturn in China’s economy, I’m pretty sure there will be one sometime in the not too distant future mainly because so much is non-transparent and you can never really know what’s real and what isn’t. Also, Chinese people I talk to seem to be largely oblivious to the possibility that there could be any problems and assume that the growth that’s been experienced over the past few decades will continue indefinitely.
    I do however, think that China will continue to see pretty good growth for at least a few more years since there’s still a lot of room for growth in many industries, Chinese consumers seem to be on a spending spree that isn’t likely to slow, and the Chinese government will do everything it can to maintain growth. I hope China can hold out a while longer before any kind of serious downturn since with American and much of Europe in such bad economic shape, a simultaneous Chinese economic meltdown could be catastrophic.

  • SteveLaudig

    The U.S. [and possibly European] rulers have handcuffed political legitimacy to the financial sector by hooking the taxpayer to the financial/rentier sector in a way that when the folding happens government goes down with Wall Street. Sooner or later everything fails. Planning for a smart failure is the better planning. The U.S. proverb “failure is not an option” is delusional. I don’t know much more than what I see I suppose, but I can see the Chinese government allowing large economic institutions fail in a non-catastrophic manner. I don’t see how the U.S. government will do anything other than continue to bail the Titanic it has created. If democracy means that a population usually gets what it votes for over the long haul then the U.S. seems to be a democracy even if the most primitive large one on the planet. If democracy means that a population gets what it needs over the long haul then China seems more of an advanced democracy. Elections [or auctions as the U.S. should call its exercises in voting ] are not the sole indicator of a democracy.

  • jon

    The China hard landing will happen concurrently with the Global Depression. China will not escape the mathematics of a global debt binge credit crunch. China does not have any influence whatsoever in changing the outcome. It is inevitable.

  • Volker Müller

    Just returned from a business trip to old Europe and what I have heard and seen there is more than alarming.
    It seems rather likely the global economy will approach its doomsday in 2012, a meltdown of the financial system that will cause much more human casualties than any natural disaster we have seen.
    To continue the allegory of the film “2012″: while most of the world will be submerged, there will be a few places left in China where humans can survive.
    I am more than glad that I live in this part of the world.

  • http://blog.frontierstrategygroup.com Frontier Strategy Group

    Asia’s outlook has darkened over the last month, partly due to declines in the Chinese property market which injected uncertainty into the region’s growth forecasts. While these developments will require active monitoring, multinational corporations should keep them in perspective. Asia is still better positioned to weather a global downturn than most other regions. FSG forecasts an average growth rate in the Asia-Pacific region of 4.8%, with only Japan experiencing negative growth. China, while projected to have deteriorating economic conditions, is still forecasted to have a growth rate almost 2 percentage points greater than that of its closest competitor, China.

  • Anya

    The fall will come not because of the government, but because of the greediness of the people ans survival of the fittest attitude. A country in which corruption, materialism are growing in parallel with the economy will eventually collide with the socialist beliefs. If the government continues its mandatory moral education and insisting on communism while the people are only concerned with personal gain there will eventually be a conflict. If not I would like to see how lack of moral and personal gain can be combined with an ideal society. China’s current religion and belief is money, communism is a utopia with no money. I am happy to be born in this era, because of the chance to see how this story will unfold.

  • Bet Arens

    @Godfree Roberts (and the voices in your head)
    “The Chinese are smarter than us (Kissinger), more realistic about money, more cooperative with one another, more patriotic, more ideologically flexible, and better governed than we ever were.The trust and approval that the Chinese people bestow on their government (Pew) is stratospheric, and rightly so.”
    - I like that you at least refer to Kissinger and Pew as sources in connection with the issues where you are not the sole authority on the subject.

  • chinamike

    Seems to me Godfree is the one with an almost total lack of understanding of Chinese culture and history. Elevating the government, system, culture etc. to the level he does is almost laughable.
    Methinks he has never been to China.

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