Every day that there isn’t a crisis of confidence in China’s economic performance is a small step beyond there being any crisis at all. The transition from this being a country which used simply to be the world’s cheapest workshop, to it being a more balanced partner in world trade terms, is well under way, and we’ll all be better off when we get there.
There are adjustment pains in the meanwhile, but the IMF's Christine Lagarde was right not to be so gloomy about China’s outlook, or its impact on the global economy. That view, though, calls on investors and politicians not to lose their heads in the meanwhile.
In a different context, Christine Lagarde once described to me a world where there was a more diverse range of powerful economic engines : the EU, US, Japan, China and India - with smaller economies also helping to provide momentum to growth, and also inertia to slowdown. A safer world, she said, and not one which depended solely on the US to keep motoring along.
Perhaps her vision is coming into view.
The other day I attended a briefing at the Carlton Club in London, by the chief analyst for a major investment fund; he’s been a “China Watcher” for about three decades now. And despite constant prompting by his clients to be pessimistic about the country, he finds he can’t be!
He looks at a country which was told it needed to encourage consumer demand and which set policy objectives to make it happen - and is implementing them. And those policies are taking effect. China starts to look "more like the rest of us", and doesn’t just need foreigners to buy cheap Chinese goods to keep the show on the road.
As China’s population gets older especially, it is shifting from being a nation of workers towards being a nation of consumers, with cash to spare. To spend on goods and services from Britain to Bhutan. Credit growth is expanding again - and in 3-6 months that should begin to show.
The rules of the gathering I attended mean that I can’t name this man, but he went on to make several other points not made when the latest stats on lower production, or of falling exports, or of the plunging Chinese stock markets are pored over.
His main message was to do with the idea that a lot of things have been bought and built on easy credit… A potential asset bubble which is bound to burst sometime. This analyst concentrated, instead, on the assets (from high speed train lines to power stations) themselves, which will still exist whatever happens in the meanwhile - they will pay off, and keep benefitting China for many decades.
He also thinks that the best is yet to come. Modern dynamic China has so far been built by strategists and middle managers who either had poor or no third level education at all. Not a bad effort for such ‘amateurs’.
What he is worried about is the daily drumbeat of doom which is thumped out in the West. Could it become self-fulfilling? And alienating.
He described China’s mindset at the moment as being somewhat ‘adolescent’…
This is a nation wanting be taken seriously, and wanting to participate fully in the wider world.
But thin-skinned as it pushes in that direction.
The investment advisor says that the world could do with being more patient, more encouraging, and less fearful. Sometimes very difficult things to offer any teenager feeling its new muscles for the first time.
“Show a bit of love!?” I asked. “Yes!” he said.
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