China 'Collapse": US loses another round in Interimperialist War Against Major Rival


"Prevent the Reemergence of a New Rival"
Originally published New York Times March 8, 1992.

Digest excerpts from: Stock meltdown exposes how markets cling to myths about China\

...One of these myths is that China’s stock market is a weathervane for the larger economy. It most clearly is not.
Patrick Chovanec, chief strategist at Silvercrest Asset Management, is one analyst who has long warned that China’s stock market is an exercise in rampant speculation, and an irrelevant indicator of how the nation is faring. “There plenty of reasons to worry about retraction in the Chinese economy but China’s stock market is not one of those,” said Chovanec, an adjunct professor of international affairs at Columbia University. The country’s bigger problems, he said Wednesday, involve managing debt and transitioning toward an economy that grows domestic consumption, instead of cheap imports.

China claims its GDP is still expected to grow 7 percent this year — an impressive number, even if hard to verify. Whatever the real growth rate, the country’s manufacturing output appears to be falling faster than expected. That’s causing major anxiety worldwide, especially for countries that export raw materials and semi-finished goods to China’s factories....

Bill Bishop, a longtime China watcher who produces the Sinocism newsletter, said many U.S. stocks were due for a correction, with investors waiting for reasons to unload. They found them in China’s reported woes and the possibility of an upcoming rate hike by the Federal Reserve. “The size of sell off was ridiculous, The idea that China is about to collapse is completely overblown.” Yet Beijing may have brought some of its problems on itself, said Bishop, for at least two reasons. One of these is lack of transparency about economic decisions by Chinese leaders, which causes investors to be more risk-averse in the face of uncertainly. “They are far too opaque and we know far too little about how they operate,” he said. A more recent problem, he said, is Chinese President Xi Jinping’s priority of “ideological retrenchment,” including requiring top party leaders to re-read books from the founding day of the People’s Republic of China. “If you have people re-reading Marx, it is not going to lead to good decisions on running your economy,” said Bishop.

On the streets of Shenzhen, it would be hard to notice a crisis of confidence. One of the world’s highest skyscrapers - the Ping An Financial Center - is rising from the central city. High-tech companies such as Tencent, Huawei and ZTE are headquartered in Shenzhen, often referred to as China’s Silicon Valley, at least in terms of hardware. Smaller entrepreneurial outfits are starting....

Along with many other China analysts, Haft doesn’t think China’s economy is anywhere close to collapsing, partly because of unique safety cushions. Chinese citizens are notorious savers, allowing families to ride out downturns betters than their counterparts elsewhere.
Indeed, some analysts think that China’s slowdown, and attempts at economic reform, creates openings for new business. China’s middle-class is increasingly traveling abroad, and they come back wanting similar services to what they find elsewhere, ranging from neighborhood convenience stores, to healthy produce delivered to their door to sound investment advice....

Chovanec said it could take longer than it should for China to reform its economy exports and build a services sector that serves a population of nearly 1.4 billion people. But as it happens, it will have enormous consequences for those who’ve grown accustomed to - and in some cases rich off of - China’s post-1980s model of development. “If you are betting for the existing pattern of growth, you are in for huge shock. The world’s second largest economy is changing gears. That is an opportunity for some and a losing proposition for others” Chovanec said.

Michael Standaert, a special correspondent, reported from Shenzhen, China. Stuart Leavenworth, McClatchy’s Beijing bureau chief, reported from Taipei, Taiwan.