In my Peterson Institute post (China’s Growth: Still Envy of the World Despite Slowdown), I said:
- To say that China hasn't grown this slowly for 25 years is to miss the point. If the data is close to accurate, then the slowdown has been gradual -- and the restructuring of the economy is desirable.
- Stock market drops are not flawless predictors of recessions (the firms on the stock exchanges - Shanghai and Shenzhen - are not representative of China's real economy).
- It is painful to lose 20% of invested money, but losing 100% due to fraud is a lot more tectonic. Is that happening on a large scale? Possibly.
- Leaving savers so vulnerable to questionable schemes could have more serious repercussions than letting the stock market do its thing. (Social stability and savings eradication do not go together.)
- I didn't mention when I wrote that piece, but now I want to add: I believe it is excellent news that the wages of China's 278 million migrant workers increased by slightly more than seven percent. Most industrial countries would be thrilled if wages rose faster than GDP.
National Bureau of Statistics of China: Personal income of Chinese residents rose 7.4% (in real terms) in 2015:
- 6.6% for urban households
- 7.5% for rural residents
Martin Wolf: China’s great economic shift needs to begin
Jeffrey Frankel: China’s Stock-Market Red Herring
The Economist: The Great Divide: Economists versus the markets
IGM Poll: China’s growth model, specifically the unusually high investment rate and low consumption rate, is unsustainable
FT: Computer-driven trend hedge funds thrive despite falling markets
FT: China annual GDP growth of 6.9% lowest since 1990
Bloomberg: China Vice President Vows to ‘Look After’ Stock Market Investors
China, which for so long provided comfort to investors, has become one of its greatest sources of anxiety. The country has shaken confidence with surprise currency moves, confused with chaotic market regulation and struck fear with criminal probes of financial executives. Li’s sought to convince the 2,500 business and political leaders present at Davos that China would stick to its pledge to open its financial markets and that the world’s second-biggest economy remains strong.
Bloomberg: China Gets More Than Ever From Services, Just Not Enough: "The tertiary component of the economy, as services are known, grew 8.3 percent in 2015"
CIW: Over 20 Billion Packages Delivered in China in 2015
WSJ: China’s Securities Czar Casts Wide Blame for Market Turmoil
Mingkand and Lu: Navigating China’s New Silk Road
CNBC: Markets tend to be manic depressive: Roubini
WSJ: China’s Change to Slower Growth Will Benefit Everybody, Says Lagarde: “China itself has embarked on an ambitious multiyear rebalancing of its economy, which is fine in and of itself and quite legitimate ... It’s a positive endeavor that in the long run, will benefit everybody” Ms. Lagarde said.
NYT, November 2015: China Aims for 6.5% Economic Growth Over Next 5 Years, Xi Says
About data quality, Nicholas Lardy wrote in the summer: “China’s growth data are hardly flawless. They are compiled by a national accounts section of the National Bureau of Statistics that is woefully short of specialists in national income accounting. As in all major economies, China’s GDP data are subject to revisions, sometimes going back many years, as better data become available as the result of periodic economic censuses and as revised methodologies are adopted. But the case that China’s real growth today is a small fraction of the officially claimed pace has not been convincingly argued.”