Professor John Ross is Senior Fellow at Chongyang Institute for Financial Studies, Renmin University of China and runs a blog called Key Trends in Globalisation. His work regularly appears in Chinese and Western media.
In an article posted yesterday he argues that economic hard landings have occurred in the past in Western economies and not in China. In addition , he predicts they will not happen in China. In the Western media, we constantly hear about pundits worrying about the state of the Chinese economy. In the past few years, with the collapse in commodity markets not a day goes by without some guy blaming China for everything. If one were to believe all this non-sense it would appear that China is the cause of all the problems that plague western economies when in reality most of them self-inflicted issues. Here is Mr.Ross quoting billionaire George Soros in the introduction to this article:
The media outside China periodically carries predictions of a China ‘hard landing’. For example George Soros grabbed headlines earlier this year by declaring of China: ‘A hard landing is practically unavoidable.’ Soros himself has an inaccurate record of investing in Communist Party led, and ex-Communist, countries such as Russia and China – having lost approximately $1 billion in Russia’s Svyazinvest telecommunications company. But similar claims regularly appear in other media.
To anyone dispassionately examining the facts these claims are extremely curious – as they are clearly the exact reverse of reality. The facts show the only real modern serious economic ‘hard landings’ were not in China but in so called ‘Western’ economies – for example the US after 2007, Japan after 1990, Russia after the introduction of capitalism in 1991. China’s economy for example has not suffered a year of negative growth for at least half a century – in contrast to every major Western economy. Therefore, the real question which has to be explained, and which is examined here, is why do Western economies suffer ‘hard landings’ but China doesn’t?
Using the example of U.S. , Japan and Russia, Mr.Ross demonstrates how the economies have had hard landings. From the article:
What causes a Western economy’s ‘hard landing’?
A seriously erroneous assumption is sometimes repeated in parts of the media that because consumption is the largest percentage of GDP it must be consumption which is the decisive influence in business cycles – including in ‘hard landings’. This is simply an elementary arithmetic error. Fluctuations in investment are so much more extreme than changes in consumption that although investment is a smaller proportion of the economy it is investment changes which dominate large scale economic downturns. This will be demonstrated in the three largest modern economic ‘hard landings’ – the US ‘Great Recession’ after 2007, Japan’s prolonged stagnation after 1990, and Russia after 1991. Analysing these three cases clearly demonstrates that the same mechanism operated in each – and also shows why China has not and will not have any serious hard landing.
The entire article is worth a read.
Why do Western economies have hard landings but China doesn’t? by Professor John Ross Key Trends in Globalisation