China just can’t seem to catch a break these days. For the country’s perennial naysayers, the issues facing the world’s second-largest economy are coming home to roost: slowing growth as China shifts from an export-dependent economy to a consumer-driven one, a boom in shadow banking prompting fears of a credit bubble, an overheating housing market and a flabby underbelly of inefficient state-owned companies that survive only thanks to cheap finance.
It’s a take on China that is, in my view, both fashionable and largely inaccurate, scaring investors away from a market that has the potential to offer a level of investment return that is increasingly difficult to find elsewhere.
Much of the latest concern about China revolves around recent GDP data showing the economy grew by “only” 7.7 per cent in the first three months of the year. Yes, the consensus expectation among economists was for growth of 8 per cent, but the economy is still ticking along at a pace that currently exceeds the Chinese government’s own 2013 GDP forecast of 7.5 per cent growth. Meanwhile, inflation, last year’s main source of worry, also looks to have been tamed. It slowed down sharply in March, with consumer prices rising just 2.1 per cent from a year earlier.