Why China will experience a 'soft' landing

We can still recall the gleams in the eyes of Goldman Sachs statisticians in 2000 as they crunched data creating correlations between several countries which soon came to be called "BRICs". They said Brazil, Russia, India and China all had great potential for growth, and they would become the dominant economies with China leading the pack - overtaking Japan by 2015, and even outstripping the US by 2043. South Africa joined the group in 2010 to create BRICS. But BRICS' collective strength has now faded, as developing economies often illustrate long-term tendencies toward lower growth rates. The average growth of BRICS has fallen from 8 percent to 6 percent, though they had annual rates as high as 11 percent. Even so, BRICS' combined economic output last year almost matched that of the US.

Market traders often cry "foul" when they perceive others might have an unfair advantage. That is exactly what the US, and other countries, kept saying China had kept the value of the yuan low relative to the rest of the world's currencies. Over the last 10 years the yuan has fallen from 8 to nearly 6 to the US dollar, but on "Black Monday" (Aug 24) many were still accusing China of beginning a currency war. But we ought not to consider a few days of rapid change as a unique indicator. Summer adjustments of the global economy have occurred sporadically, yet relatively often.

In the near future, China will have an easier time selling its goods to other countries but will find buying commodities more costly - yet perhaps it doesn't wish to buy so much raw materials because of the economic slowdown. China's index of manufacturing growth (purchasing managers index or PMI) has been below 50 for almost a year, falling from occasional highs of 55 from 2004 to 2014. Since "50" is seen as the divide between growth and slump, this suggests China is heading for a fall. And if the fall is "hard" it will have a significant effect on the rest of the world. Associated with its reduced PMI is a general lack of new capital investment and also job shedding (with its associated loss of employees' knowledge base).