From his perch as Professor of Economics and International Development and Director of the Saw Swee Hock Southeast Asia Centre at the London School of Economics, Danny Quah closely observes global economic trends and comments on them at his blog, www.dannyquah.com, and for leading business publications.
His latest think piece reprinted at the Fair Observer website has the provocative title, "China's Economy is Not Collapsing." Quah works his way through the statistics, assumptions and politics of China, in a way that's difficult to summarize here and should be read as a whole. His conclusion is:
Indeed, recent events in China’s economic trajectory have set off alarm bells for many observers. But these same incidents, set against a slightly more textured background, are actually nuanced in their implications.
China is not imminently in meltdown.
None of this is to say China’s economy will continue growing at double-digit rates forever. Nor does it argue that China’s policymakers have consistently done the right things. But neither are those policymakers obviously guilty of incompetence or excessive interventionism.
Steep challenges lie ahead. China’s pile of debt is a tricky mix of privatized, local governmental and national obligations, and there remains considerable uncertainty how this debt hangover will work out. China’s industrial restructuring, its anti-corruption campaign, its transition past the Lewis Turning Point and out of the middle-income trap, and its environmental and demographic challenges all remain daunting. These challenges are substantive and long-term, and China’s policymakers will have to deal with them in a properly measured and considered way.
But China’s exchange rate and stock market gyrations? They have likely already attracted far too much attention relative to substance.
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