The Coming Muddle-Through Of China

David Pierson of the Los Angeles times has written an interesting story about prognostications on the fate of China’s economy-Predictions of an economic collapse in China are in vogue.

Pierson interviews most of the usual suspects (Gordon Chang, Michael Pettis, Tao Wang, Arthur Kroeber, Victor Shih) and even includes a quote from yours truly.

The most incendiary quote in the article comes from Kroeber (see this recent post Arthur Kroeber: Why China Can Keep Growing | Sinocism) who says of Jim Chanos that:

“Chanos is a company analyst with no understanding of economics who treats China as if it were a company. It’s not; it’s a country,”

The prescient Victor Shih gets the last word. It is hard to argue with Victor, but I remain firmly in the “China will muddle through” camp:

Bill Bishop, a closely followed independent tech analyst in Beijing, said that “the pendulum has swung too far” in favor of the bears.

“I think the fears are overblown. People in the U.S. are scared of China, and some people hope it drops,” said Bishop, co-founder of financial news service CBS Market Watch. He described himself as belonging to the “China-will-muddle-through camp.”

That faction says China’s leaders will do what it takes to avoid calamity. Others aren’t so sure.

“The reasonable bulls and bears among us agree on most of the facts,” Northwestern’s Shih said. “But at the end of the day, we disagree on the Chinese government’s ability to make tough changes.”

Follow me on Twitter @niubi or Sina Weibo @billbishop.

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