Prophets of China-doom don’t have a bad track record; theirs is an appalling one. Not one major prediction about a China demise, or a terminal illness blighting parts of its economy, made in the last 20-years has been correct. Not one.
In short, the surest way to get a forecast about China wrong in recent years has been to make it flamboyantly pessimistic. This is worth remembering as China is beginning what will almost certainly be a good 2023.
We know a good year lies ahead not because I’m a forecasting savant, but because the last few years have been so poor. This year the economy will not be retarded by shutdowns, lock-downs or slowdowns. The property market will stabilize, industrial output will increase and top line GDP growth will surge with the prospect of momentum continuing into 2024*.
[* Don’t just take my word for it. I’m in part directly quoting this report World Bank: Global Economic Prospects January 2023.]
What looks like a steady diet of good news ahead though will be met by clack from a cabal of, mostly for-profit, pessimists warming up old-chestnut predictions in an attempt to stimulate fresh consternation.
Before that process gets up too much steam I’d like to get in with this early reminder of how useless this sort of analysis has been in the last two decades.
A few of the more famous examples:
Mr. Gordon Chang, in 2001, penned ‘The Coming Collapse of China’, a book in which he predicted this event within five, ten at the very latest, years. Today, he has (paid, I assume?) a gig on Fox News who continue almost unbelievably to reference his book as part of his bona fides.
In 2010 Mr. Jim Chanos (a respected short-selling fund manager) and Mr. Li Daokui (a member of the Monetary Policy Committee of The People’s Bank of China, the central bank, 2016~2018) separately assured us the Chinese property market was “Dubai times 1,000 – or worse” and “The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,..”. It wasn’t.
Charlene Chu, whom the Wall Street Journal described in 2013 as “..the ‘Rock Star’ of Chinese Debt Analysis”, was warning a year earlier, in 2012, about problems ahead in 2013 and 2014. Problem loans, she said, could “burn through the [banking] sector’s entire pre-provision profit for both years, as well as half its equity.” They didn’t.
Mr. Kyle Bass, a notorious fund manager sent a long letter to his clients in February 2016 (Kyle Bass 2016 Letter) in which, among other things he referred to “..the impending disaster in [The Chinese] banking system.” The letter was widely referenced at the time but none of its predictions, from banking sector meltdown to the vaporization of China’s foreign exchange reserves, have even flirted with reality.
More recently. The Chairman of the (U.S.) House Foreign Affairs Committee and former Chairman of the House Homeland Security Committee (an extremely well-informed individual I must therefore presume) Mr. Michael McCaul*, a Texas Republican, predicted in January last year “I do think after the Olympics — China has gotten so provocative, so aggressive in the South China Sea, that you are going to see the CCP, the [Chinese] Communist Party invading Taiwan,”. Didn’t happen.
[*In fairness to the Senator he also predicted Russia’s invasion of the Ukraine at that same time (McCaul predicts). This last pants-on-fire! China prediction became all the rage in 2022 and seems to have legs as we head into 2023. However, I’m not presently aware of troops massing, threats to the effect veiled or otherwise or any tangible manifestation that China is planning anything for Taiwan other than what they’ve been doing since 1949 i.e. having a harrumph from time to time whilst pursuing an ever closer economic partnership.]
I could supply more examples; but you’ve got the point.
That China-doomsters have been consistently wrong is only half the story. It’s worth taking a moment to reflect not only on the stumbles that didn’t occur, but how well China has developed in the last 20-years.
The charts below (all from 2001 to 2021) require no elaboration.
It’s obvious that predictions of calamity have been consistently wrong at the same time as the Chinese government has, in fact, done a splendid job in terms of making their citizenry more prosperous. China’s planners have therefore not just failed to fail, they’ve triumphed spectacularly.
True, others have pressed forward too; but the Chinese model has uniquely produced the biggest rise in living standards for the largest number of people over the shortest period of time in the history of our species.
So, be of good cheer and don’t be misled. China will progress despite the jeers from critics whose real job is to gather clicks, attention and TV appearances but whose forecasting nous has been demonstrated again and again as having no practical value, at all.
Nial Gooding
Monday, January 16th 2023