Wrong analyses of China - listed by author and date

Numerous authors make wrong analyses predicting an economic crash or drastic slowdown in China and then, when these fail to occur, nevertheless continue to present themselves as 'China experts'. The ability to do this rests on readers forgetting what they predicted. Given that the test of an analysis and a theory is its ability, or otherwise, to predict real developments this periodically updated article conveniently lists, for reference, by author and date such wrong predictions of coming economic disaster in China so that readers can use it as reference to judge the track record of various analysts they read.

This article was last updated on 28 February 2016.

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Bremmer, Ian: 12 November 2011

'The world's three largest economies can't continue along their current paths, and everybody knows it. Investors watch nervously for signs that China is headed toward a hard landing, that America will sink back into recession, and that the euro zone will simply implode.

'In all three cases, kicking the can down the road has staved off disaster so far, but the cans are getting bigger and heavier. Which economy will be the first to stumble on its problems?...

'In China... It has been... three years since the financial crisis made clear that China's growth remains dangerously dependent on exports to Europe, America and Japan.

'To ensure long-term economic expansion (and political stability), Beijing must figure out a way to encourage Chinese consumers to buy more of the products that local manufacturers make. This will demand a massive transfer of wealth from the state and China's state-owned companies to Chinese households.

'But Beijing is moving in the opposite direction. The leadership responded to Western market turmoil not by boosting consumption but by increasing state and private spending on fixed investment, which now accounts for nearly half of China's growth. The result has been an explosion in residential and commercial real estate, more state spending on infrastructure and more cheap loans from state-owned banks to state-owned enterprises.

'Indeed, a key obstacle to reform is that China remains so heavily invested in its state-managed model of capitalism. Of the 42 Chinese companies listed in the 2010 edition of the Fortune 500, 39 were state-owned enterprises, and three quarters of China's 100 largest publicly traded companies are government controlled. Party officials with a stake in the success of state-owned enterprises have amassed considerable power within the leadership, and they ferociously resist efforts to transfer away their wealth to private enterprises and ordinary citizens.

'China has the cash and foreign reserves to postpone a crisis. But growth is slowing, financial stresses are rising, and there is good reason to fear that China's days of can-kicking are numbered as well...

'Make no mistake: The challenges that the U.S. faces are formidable, and persistent political gridlock could delay badly needed fiscal and structural reforms. But everything is relative, and the best can to be kicking down the road just now is undoubtedly the one made in America.' (Written with Nouriel Roubini)

Chang, Gordon:

June 2002 The Coming Collapse of China pxxiii, ''A half-decade ago the leaders of the People's Republic of China had real choices. Today they do not. They have no exit. They have run out of time.'

21 February 2016 Forbes analysis : 'China’s... financial system is falling apart.'

Duncan, Richard: 17 February 2011

'regardless of what happens in the US, China is facing a much more difficult future than is generally believed. Every boom busts. Every bubble pops. China will be no exception.

'It is a serious mistake to believe China’s economy will continue to grow at 8 per cent or more for the next decade. That’s what people believed about Japan in 1989. Today, Japan’s economy is no larger than it was in 1993, if you don’t adjust for deflation. 2 per cent to 4 per cent annual GDP growth would be an excellent outcome for China over the decade, in light of the enormous capital misallocation that has occurred there over the past 10 years.'

Economist, The: 15 June 2002 'A dragon out of puff'

'In the coming decade, therefore, China seems set to become more unstable. It will face growing unrest as unemployment mounts.'

''the economy still relies primarily on domestic engines of growth, which are sputtering. Growth over the last five years has relied heavily on massive government spending. As a result, the government's debt is rising fast. Coupled with the banks' bad loans and the state's huge pension liabilities, this is a financial crisis in the making.'

 Keen, Steve 8 October 2015

'China crash will occur and add to global stagnation caused by excessive private debt.'  

Krugman, Paul: 14 March 2010

'The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure.' China's actual current account surplus in 2010 turned out to be $237 billion. Krugman never explained why he accepted this wholly inaccurate and unsubstantiated figure.

Magnus, George 16 August 2014

'During Xi’s period in office, which runs to 2022, I expect China’s GDP growth to slide to 4-5%, and there may be periods when growth doesn’t even make it to this level.'

Pesek, William

29 June 2015 in Bloomberg View, '‘Chinese policy makers seem to have exhausted whatever magical powers they had been using to keep their economy aloft.’

‘The world, after all, has had a few years to contemplate a Greek exit from the euro. But if the world's biggest trading nation suddenly hit a wall, it would be a catastrophe of a different order, wreaking havoc on economies near and far.’

Pettis, Michael:

14 August 2009 : 'I continue to stand by my comment last year... that the US would be the first major economy out of the crisis and China one of the last.'

11 March 2012 : ' 'I still maintain that average growth in this decade will barely break 3%.' 

Roubini, Nouriel: 12 November 2011

'The world's three largest economies can't continue along their current paths, and everybody knows it. Investors watch nervously for signs that China is headed toward a hard landing, that America will sink back into recession, and that the euro zone will simply implode.

'In all three cases, kicking the can down the road has staved off disaster so far, but the cans are getting bigger and heavier. Which economy will be the first to stumble on its problems?...

'In China... It has been... three years since the financial crisis made clear that China's growth remains dangerously dependent on exports to Europe, America and Japan.

'To ensure long-term economic expansion (and political stability), Beijing must figure out a way to encourage Chinese consumers to buy more of the products that local manufacturers make. This will demand a massive transfer of wealth from the state and China's state-owned companies to Chinese households.

'But Beijing is moving in the opposite direction. The leadership responded to Western market turmoil not by boosting consumption but by increasing state and private spending on fixed investment, which now accounts for nearly half of China's growth. The result has been an explosion in residential and commercial real estate, more state spending on infrastructure and more cheap loans from state-owned banks to state-owned enterprises.

'Indeed, a key obstacle to reform is that China remains so heavily invested in its state-managed model of capitalism. Of the 42 Chinese companies listed in the 2010 edition of the Fortune 500, 39 were state-owned enterprises, and three quarters of China's 100 largest publicly traded companies are government controlled. Party officials with a stake in the success of state-owned enterprises have amassed considerable power within the leadership, and they ferociously resist efforts to transfer away their wealth to private enterprises and ordinary citizens.

'China has the cash and foreign reserves to postpone a crisis. But growth is slowing, financial stresses are rising, and there is good reason to fear that China's days of can-kicking are numbered as well...

'Make no mistake: The challenges that the U.S. faces are formidable, and persistent political gridlock could delay badly needed fiscal and structural reforms. But everything is relative, and the best can to be kicking down the road just now is undoubtedly the one made in America.' (Written with Ian Bremmer)

Soros, George

21 January 2016 Bloomberg Business: 'A hard landing is practically unavoidable,' 'I’m not expecting it, I’m observing it.'

Comments

[PB]

I started following your posts simply because the others (in particular a certain economist listed in the article) were being consistently wrong about China.

I think a lot of these pronouncements have to do with ideology and wishful-thinking. There is no self-assessment or revision of thinking coming forth either.

[John Ross]

@Oxkev
Noted thanks. There will be a long list on Paul Krugman however as his wrong analyses on Asia, including China, goes back to his 1995 article 'The Myth of Asia's Miracle' http://bit.ly/rsDooP.
This article particularly singled out for criticism as a wrong model of development Singapore - which now has a higher GDP per capita than the US!

[Oxkev]

You might want to add this piece by Krugman to your list of articles. http://www.nytimes.com/2011/12/19/opinion/krugman-will-china-break.html This one predicts the bursting of a Chinese property bubble.