China economy skeptics should rethink their betting
BEIJING - It is time for predictions about the coming year, and you are bound to hear more than a few scary prophecies about an imminent economic hard landing in China, triggered by a debt crisis, a bursting property bubble, financial turmoil and more.
It is an easy game, and these China bears have been selling imaginary fears for their own fame and fortune for a long time.
At the start of the year, Chinese yuan devaluation and capital outflows gave rise to market concerns about an upcoming financial crisis.
A well known billionaire investor said "a hard landing is practically unavoidable," while a foreign commercial bank expected China's GDP growth to nosedive to 3 percent this year, and a think tank put China's economy crashing as the main possible crisis with a far-reaching global impact in 2016.
They were all wrong, of course.
The doom-and-gloom scenarios created headlines but failed to emerge. All the assumptions were false alarms. The country's growth rate this year appears set to hit about 6.7 percent -- beating almost all forecasters' expectations.
The current yuan depreciation due to the strengthening greenback has unsurprisingly given rise to a new round of bearish talk on the Chinese economy.
However, the chances of economic chaos are slim. Stability is high on the agenda for China's economic work next year as the tone of the recently concluded economic work conference suggested.
Of course, market worries about a Chinese economic slump are not groundless. Burdened with debt overhangs, excess capacity, a high-leveraged property market, zombie state-owned enterprises and struggling banks, China is prone to being portrayed as the next victim of a crisis.
Such fears are overblown and based on outdated rationale. China doubters believe there is good reason and related history for the crashing of the Chinese economy, but the world's second largest economy is just too complicated to predict, due to its unique political, social and financial conditions.
Challenges and crises are not the same. The country's successful steps to cool a red-hot property market and keep the yuan stable this year demonstrate that the government has the administrative and financial resources to address imbalances without a disorderly adjustment.
While China's challenges should not be taken lightly, it continues to make encouraging headway on structural adjustments in its real economy, evident from consumption contributing to more than two-thirds of overall growth, and rapid growth in the services sector.
Most importantly, a China imploding is good for no one. China's economic growth contributed to over 25 percent of the world's total GDP. A sharp slowdown in the Chinese economy will send huge tremors across an already-shaky global economy with troubled trade and financial markets. It will not just be a crisis for China, but a crisis for the whole world.
Turbulent markets are favored by speculators, but the odds of a Chinese economic hard landing are so tiny that China economy skeptics would do well to rethink their betting.