Dissenting views on China's economy

by Getty Images via DaylifeWhat do you do as a magazine and you have no clue what direction China's economy is taking in the coming years? You ask three economists for their viewpoint, one on the gloomy side, one on the optimistic side, and one in the middle. It might leave your readers confused, but at least you have filled some pages.
The China International Business took that line, actually shedding not much clarity on the issue. On the gloomy side we have Michael Pettis, Professor of Finance, Guanghua School of Management, Peking University:

It would be an historical anomaly for a developing country plugged deeply into the previous global imbalances to emerge from a global crisis in better shape than the leading financial centers, and especially unlikely for China given the weaknesses in the financial system and imbalances in the economy. China’s importance in the world economy is certainly growing, but I see the global crisis as retarding the process, not accelerating it.

But fortunately,chief economist Wang Tao disagrees:

China is in a better position than most countries to weather this economic crisis. As I mentioned earlier, China’s financial system has little direct exposure, and China does not face a liquidity problem associated with capital outflows, and will continue to have a stable exchange rate.
More importantly, domestic fundamentals were relatively strong before the onset of the crisis — corporations have enjoyed record profits, with low debt-asset ratios, household debt is quite small, overall bank lending has been growing by less than nominal GDP — so there is not much leveraging to be deleveraged.
That leaves a lot of room for policy stimuli, such as an easing of monetary policy. In addition, the government is in a strong fiscal position to increase spending to help sustain domestic demand.

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Making sense out of China and its economic developments is an art. At the China Speakers Bureau we have a wide range of leading voices, able to help you. Do get in touch if you need one of them.

Arthur Kroeber
by Fons1 via Flickr

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