Has China’s bright future turned dim?
Want to know when China’s economy’s going to crash?
“The crash came at the end of October of last year. This is really clear,” says Anne Stevenson-Yang, research director at J-Capital research in Beijing.
“Whether it’s clothing or food service or steel or cement or anything, you can’t find anything that’s doing better this year than last year.”
Bullish economists see this as a necessary economic adjustment as China takes pains to rebalance its economy. Stevenson-Yang says China’s leaders have fooled people into thinking that it’s operating the economy from a control pod.
“Somehow China has persuaded the world that it is different; that in fact it is a group of incredibly brilliant competent and objective men who are steering the ship of state in this brilliant and objective manner,” says Stevenson-Yang.
In fact, says Peking University economist Michael Pettis, if this group of men doesn’t take steps to fix China’s economy, the country has five years — at most — before it runs into a significant debt problem. The challenge, says Pettis, is that Chinese officials need to start sharing — taking money hoarded by the state and putting it into the hands of real people, balancing who gets what.
“The good news is that the government is taking it very seriously,” says Pettis. “I, as a pessimist, thought that they wouldn’t begin a rebalance process until the new leadership came in in 2013. But in fact I was wrong, it looks like they have began to rebalance the economy this year, because growth rate has slowed a lot, which is one of the preconditions for rebalancing.”
And that’s not necessarily bad news for the U.S. economy. If China’s economy slows down but Chinese consumers keep buying, that’ll help balance out China’s trade relationship with the U.S., something American politicians have been after for years.
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