Never have views on China’s growth prospects been so tentative. For Beijing — and a shrinking share of optimists — the country can grow at about 6-7 per cent annually in the coming five years. But for the more hardened pessimists, a collapse to 3-4 per cent or even lower is coming.
For a country subject to so much scrutiny¸ one would think a consensus would emerge. In this case, however, the divergence comes from both sides seeing China as a highly distorted economy. The optimists see the distortions as a source of increased productivity, if addressed; while the pessimists see them leading to economic demise. How does one reconcile this paradox?
The pessimists see a country where excessive state involvement has led to multiple emerging risks, from surging debt levels to a runaway property market. Even one such predicament can break an economy — dealing with several would seem to be an impossible undertaking.