China Sceptics Get It Wrong Again

Posted in the China Forum

Comments

Showing posts 1 - 9 of9
Mark

Lane Cove, Australia

|
Report Abuse
|
Judge it!
|
#1
Sep 27, 2013
 
China’s eagerly anticipated “hard landing” hasn’t happened yet, and recent indicators make me wonder (not for the first time) if it ever will. In the past two months, the Chinese economy has actually shown signs of accelerating.
Constant pessimism in financial markets about the country’s prospects is only partly guided by economic analysis. There’s also the faith-based view that growth as rapid as China’s simply can’t go on - and that a non-democratic country really shouldn’t expect to prosper.
Many sceptics have been highlighting China’s impending collapse for almost as long as I have been following the country. Maybe the sceptics should be viewed a little more sceptically.
By the end of this year, China’s gross domestic product will be roughly $US9 trillion, making its economy comfortably more than half the size of the US, and half as big again as Japan. I recall once projecting that China might be as big as Japan by 2015. The country’s far ahead of that optimistic schedule.
China’s economy is already more than three times the size of France or the UK, and half as big again as Brazil, Russia and India combined. Of the four BRIC countries, China is the only one to have exceeded my expectations. The other three have done less well than I’d hoped.
As I mentioned in a previous column, China is in effect creating another India every two years - making a mockery of those who’ve argued that India’s democratic model is more likely to deliver long-term economic success. China is already more than four times bigger than its southern neighbour. India’s economy won’t rival China’s for a very long time, if ever.
With GDP growth of 7.5 per cent, inflation running about 3 per cent, and a currency that’s rising gently against the US dollar, China is adding about $US1 trillion a year to global GDP, easily boosting its share of the total.
For many analysts, none of this is enough. According to a popular refrain, China might have staved off disaster in 2013 and papered over the cracks yet again in the short term - but next year (or maybe the year after), the crunch will come.
Supporting this notion is a question I’m asked all the time: If China’s doing so well, how come everyone always loses money investing there? Let me explore both issues a bit further.
It isn’t clear to me why China’s economy must deteriorate next year. China’s slowdown to its current 7.5 percent growth rate was well signposted by a sharp slowdown in leading indicators. Those measures, including monetary growth and electricity usage, are no longer flashing red.
Coincident indicators such as the monthly purchasing managers’ index have picked up. Unless you believe that China is somehow doomed to fail, these signs are encouraging. They suggest that the rest of this year and the first part of 2014 might see slightly stronger growth.
The more resourceful pessimists next argue that the better growth signals are coming from parts of the economy where growth is unsustainable - such as the urban housing market and government-directed investment - from excessive growth of credit extended by shadow banks, and not from a broadly based expansion of consumer spending. If this were clearly the case, I’d be a pessimist, too, because a buoyant China needs consumers to take the lead.
Data for monthly retail sales suggest that consumption has held up well despite the fall in the trend of industrial production. I closely follow the trend of retail sales, adjusted for inflation and relative to the trend of industrial production, and though not moving in a straight line, this indicator has been generally rising for three years.

Continue.......
Mark

Lane Cove, Australia

|
Report Abuse
|
Judge it!
|
#2
Sep 27, 2013
 
This is a pretty good sign that the rebalancing China needs is happening. Another is the decline in the current-account surplus to about 3 per cent of GDP.

Reducing the external surplus from more than 10 per cent of GDP before 2008 to about 3 per cent now - while limiting the fall in growth from 10 per cent to about 7.5 per cent - is quite an achievement. In my view, the “unsustainable” component of China’s economic prospects was the current-account surplus, not the growth rate, and the needed adjustment in the surplus has been achieved.

What about investors losing money in China? How can that be, if the economy is doing pretty well? It depends on how you measure investors’ returns. True, passive investors in the Shanghai index have suffered since 2007, despite a big rally from late 2008 through late 2009.

But how many investors invest that way? More important, the Shanghai index is dominated by past winners in the China growth story. If China is rebalancing - moving away from exports, improving the quality and sustainability of its growth, depending less on government-backed companies - then the winning investments will be quite different than before.

It’s revealing that the Shenzhen index is performing much better than the Shanghai index, thanks to its greater exposure to newer, smaller, private companies. There’s a more general point here: When a country is embarking on a significant compositional change to its economy, stock-pickers rather than index-trackers have the upper hand.

The same logic applies to foreign companies trying to benefit not just from China’s ongoing growth but also from its new drivers of growth. No doubt this is a little simplistic, but Apple or Procter & Gamble, say, are likely to benefit more in this economic environment than Caterpillar.

If you ask me, China’s economy hasn’t finished impressing the world with its strength. The changing foundations of that strength may make the prospects harder to read - but the fact that the underpinnings of Chinese growth are indeed changing is all to the good.

Jim O’Neill is a former chairman of Goldman Sachs Asset Management.

Bloomberg

http://www.smh.com.au/business/china/china-sc...
Snowflake

San Francisco, CA

|
Report Abuse
|
Judge it!
|
#3
Sep 27, 2013
 

Judged:

1

1

1

Like most well educated analysts say, there is no stopping China, they are passing the world by.
atilla the Han

Australia

|
Report Abuse
|
Judge it!
|
#4
Sep 27, 2013
 

Judged:

1

1

1

those china septic tanks have been wrong for the last 20 years. they will be wrong for another 20 years.

gordon chang's headstone will read,

"I THINK, THEREFORE I AM WRONG"
Snowflake

San Francisco, CA

|
Report Abuse
|
Judge it!
|
#5
Sep 27, 2013
 
Gordon Chang is a Chinese expert and is of Chinese descent, how can he be so wrong?
Snowflake

San Francisco, CA

|
Report Abuse
|
Judge it!
|
#6
Sep 27, 2013
 

Judged:

1

1

1

I am right more times than he is.
AAA

UK

|
Report Abuse
|
Judge it!
|
#7
Sep 27, 2013
 

Judged:

1

1

1

Snowflake wrote:
Gordon Chang is a Chinese expert and is of Chinese descent, how can he be so wrong?
He is an American. Like most American Chinese, they pretend to understand Chinese elsewhere and brag about it so to get American public to listen and sell more books. His book was written in 2001, so even if he is right within next 7 or 8 years, that doesn't make him right, timing is totally out.

But then again you have a Norwegian economist who tried to get Chinese to listen to his prediction here. Seems to me that there is no lack of people who try to make a living out of this, regardless of race and religion, as long as they can sell story.
RayH

Shenzhen, China

|
Report Abuse
|
Judge it!
|
#8
Sep 28, 2013
 

Judged:

1

1

AAA wrote:
<quoted text>
He is an American. Like most American Chinese, they pretend to understand Chinese elsewhere and brag about it so to get American public to listen and sell more books. His book was written in 2001, so even if he is right within next 7 or 8 years, that doesn't make him right, timing is totally out.
But then again you have a Norwegian economist who tried to get Chinese to listen to his prediction here. Seems to me that there is no lack of people who try to make a living out of this, regardless of race and religion, as long as they can sell story.
Gordon Chang predicted in his book in 2001 that China's economy would collapse by 2006. We're in 2013 now.
Snowflake

San Francisco, CA

|
Report Abuse
|
Judge it!
|
#9
Sep 28, 2013
 

Judged:

1

1

1

When you can't beat them join them. That is what the West should do instead of bashing China. Join in their success.

Tell me when this thread is updated: (Registration is not required)

Add to my Tracker Send me an email

Showing posts 1 - 9 of9
Type in your comments below
Name
(appears on your post)
Comments
Characters left: 4000

Please note by clicking on "Post Comment" you acknowledge that you have read the Terms of Service and the comment you are posting is in compliance with such terms. Be polite. Inappropriate posts may be removed by the moderator. Send us your feedback.

23 Users are viewing the China Forum right now

Search the China Forum:
Topic Updated Last By Comments
Can China be Trusted? 25 min Taiwanese 8
NEWS: China BEGS Philippines to delay case 3 hr lct 159
do chinese girls want black man husband? (Oct '08) 5 hr chidex 2,422
US caught in own web of lies 10 hr lct 1
Taiwan MUST NOT sign the trade pact with China !!! 10 hr McGold 99
Indonesia equips frigates, corvette with stealt... 10 hr Ottoman 1
Hong Kong Election 2017 11 hr Waken Up Lions 390
•••
•••
•••
•••