Tag Archives: global macro

China: Searching for a New Equilibrium

Hasenstab_Michael
Michael Hasenstab, Templeton Global Macro

By Michael Hasenstab, Ph.D.
Chief Investment Officer
Templeton Global Macro

Special to the Financial Independence Hub

We find that most observers tend to fall into one of two camps on China: the die-hard skeptics and the perma-bulls. The skeptics are convinced that nothing about China—from the data to the banking system to the demographics—bears close inspection. This school of thought argues that the official numbers are too unreliable to follow, and the imbalances too large to warrant detailed analysis.

Skeptics envision an implosion of the Chinese economy, resulting from a bubble in the housing market, in local government debts, in the stock market—or frequently in all three. In their view, the collapse is impending, and has been for the last 10 years.

The smaller group of China bulls takes an extremely benign view of the country’s transformation. This group expects the China growth miracle to continue smoothly, with any moderation lasting only temporarily. This camp tends to shrug off concerns about imbalances, arguing that China has more than enough money, the right policies in place and an unparalleled control over its economy.

We try to take a few steps back and provide an objective assessment of where the Chinese economy currently stands, where we see it going and what risks we foresee in the period ahead.

Optimistic but cautious

Shanghai Lujiazui civic landscape of China national flags
Shanghai Lujiazui civic landscape of China national flags (DepositPhotos)

We take a more nuanced and balanced view than either the die-hard skeptics or the perma-bulls. On balance we remain optimistic about China’s outlook, but we recognize that the country faces formidable policy challenges and substantial risks that bear close monitoring. Continue Reading…