Am I A China Bear? The Answer May Surprise You...
Patrick Chovanec | Jul 18, 2012 02:12AM ET
There are two schools of thought on the Chinese economy right now. The first says “It’s always darkest just before the dawn.” The second says “It’s always darkest just before it goes pitch black.” It’s clear that China’s economy is slowing. But what happens next is far from clear, and the subject of much debate.
The conventional wisdom at the moment, among officials and economists, runs something like this: China’s economy is slowing alright, perhaps a bit too much for comfort, but it’s mainly a self-induced slowdown driven by the government’s own cooling measures. GDP growth is still above Premier Wen’s target of 7.5%, and is destined to improve in the 2nd half of the year as the government switches gears to re-stimulate the economy.
The slowing inflation rate gives them plenty of room to ease. The real estate market has already bottomed out, and the banking system is stable. Maybe stimulating more investment isn’t the best thing for China’s economy in the long run, but Chinese leaders have the ability to kick that can down the road for some time. They have time.
No they don’t. I disagree with virtually every single element of the conventional view I’ve just outlined. Over the next few days, in a series of posts — on credit, real estate, inflation, and stimulus — I will describe how and why. For the last two weeks, I’ve been on a bit of a hiatus from this blog, focusing on my
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