Opinion | A booming US economy and a Chinese crash? Think again

For the first three quarters of this year, China’s growth of 5.2 per cent came from improving efficiency on the supply side; in the US, growth came on the back of its fiscal deficit increasing sharply as a proportion of its gross domestic product.

Yet there is manufactured consensus in the West that China’s economy is crashing and the US economy is booming. For China, its deflating property bubble and high youth unemployment rate are cited as evidence. As I have said before, when an economy enters a downturn for the right reasons, it is an opportunity for renewal. And China appears to be making all the right decisions.

China’s economy has been plagued by “twin cancers”: a property bubble and shadow banking system rife with Ponzi schemes. A bunch of very destructive people screamed “GDP!” and “jobs!” to get the government to print money. China was marching to the cliff. But the government stopped feeding the beasts two years ago.

Chinese workers are among the world’s most competitive. As long as China’s economic system is not too obstructive and the global market remains open, China will boom. Prosperity happens naturally in peacetime China. Only endemic government corruption and a mass speculative frenzy can bring China down. These destructive forces are in check for now, so China’s immediate future looks good.

Dealing with the twin cancers will take a long time and the economic pain is just beginning. The losses embedded in the shadow banking system, for instance, are estimated to be in the trillions of yuan – and the psychological blow from these losses has yet to sink in fully.