Despite understandable market anxieties given China’s size and influence, most agree that fears of a meltdown in the world’s second-largest economy are almost certainly overblown.
The latest upheaval in China’s stock and currency markets, triggering investor malaise at the start of the year, doesn’t mean the Chinese economy has deteriorated in recent months. In fact, China is likely to remain the single biggest driver of global growth in 2016.
China is better positioned to make the difficult transition away from exports and investments and into a consumer-driven service economy than other Asian tiger economies that have attempted to do so in the past.
In fact, China is further along in that adjustment than is generally known. The conventional thinking is that China’s economy remains dominated by an industrial sector focused on exports. It was a weakening of China’s manufacturing data early this year that largely set many global investors on edge.
But this ignores the relatively strong services sector, which has been the main engine of Chinese growth for the last three years and now accounts for more than half of the country’s economy, said Nicholas Lardy, a China expert at the Peterson Institute for International Economics. China’s opaque economic and political system makes it impossible to know for sure, but Lardy and other analysts are confident that Chinese private spending has continued to rise even as manufacturing has slowed.
“Our picture of China as a big export machine just isn’t accurate,” said Barry Bosworth, an Asia economic expert at the Brookings Institution. “What matters is that China is fundamentally a domestically based economy. It’s a great big domestic economy,” he added. “And a threat of a collapse is very small. It’s just got too much wealth behind it.”
Echoing the eloquent post made by Neil earlier - I see nothing but opportunity here.