China’s latest economic data was published today (17 July 2017). It showed strong growth on all key indicators. Compared to the same period in the previous year:
- GDP rose 6.9%;
- Industrial value added rose by 7.6%;
- Retail sales grew 11.0%;
- Urban fixed asset investment rose 8.6%.
This is a performance exceeding any major Western economy by a huge margin.
But do you remember all those stories in the media last year and since by Western ‘China experts’ about how China was supposedly going to suffer a ‘hard landing’? For example on 5 April 2016 the Wall Street Journal reported:
‘At a recent workshop hosted by the Council on Foreign Relations, a nonpartisan U.S. think tank, participants—35 or so academic economists, Wall Street professionals and geopolitical strategists—lined up around three different growth scenarios for China. Only 31% chose the optimistic one, defined as 4% to 6% annual growth, dependent on leaders successfully implementing reforms; 61% foresaw a “lost decade” of 1% to 3% growth; the rest thought a so-called hard-landing, or contraction, was most likely.”
‘Of course it wasn’t a scientific survey, but what’s interesting is that apparently nobody considered the possibility that the Chinese government could deliver on its promise of “medium to fast” growth, meaning 6.5% or higher.’
Given China’s 6.9% GDP growth over a year later if that was the quality of analysis in the Council on Foreign Relations, one of the US’s most august institutions, no wonder US foreign policy makes mistakes.
The reality is, of course, there is an entire genre of ‘econo-fiction’ in the West which pursues the policy of an economic ostrich – put your head in the sand so you can’t see reality. Probably its most notorious example is Gordon Chang’s The Coming Collapse of China but thousands of other examples could be chosen.
Serious analysts, who want to have an accurate view of China’s and therefore the global economy, and who made such predictions of a China ‘hard landing’ or ‘crash’, will honestly admit ‘I was wrong’ – that is to be respected. Unfortunately experience shows that the ‘econo-fantasists’ predicting a China hard landing will continue to turn out their misanalysis – not merely making entirely wrong predictions but costing companies who believe it hundreds of millions of dollars.
P.S. to give a flavour of the errors in financial media on China the pictures below show two articles from the Wall Street Journal. The first, from 17 July 2017, reports how China’s GDP growth was 6.9% and easily hits its growth target. The second from 5 April 2016 was the one reporting the unanimous opinion of the economists in the US Council on Foreign Relations predicting it was impossible for China to hit its growth targets – and 61% believing China faced a ‘lost decade’ 🙂