Nicholas Lardy: False Alarm on a Crisis in China 中文
Recent economic events in China have created turmoil in the global markets. Many economists believe that China is experiencing a financial and economic meltdown. Nicholas R. Lardy explains in an op-ed (中文) in today’s New York Times that this apparent meltdown is nothing more than a popular narrative, and that China’s economy is still holding up reasonably well.
First, China’s economy is on pace to grow at 7 percent this year. Wage growth has continued to grow at a rapid pace, and more nonagricultural jobs have been created this year than ever before. Lardy does not believe that these data points are consistent with an economy heading for a hard landing.
Second, many economists believe that the economic decline in China’s industrial sector is a sign of a slowing economy. Lardy explains this is too simplistic: For the past three years, China’s economy has been moving away from the industrial sector, with the services sector driving the economy forward.
Third, economists believe that the debt burden incurred by China in recent years has thrown the country into a financial crisis. However, after China modestly depreciated its currency earlier this month, there has been no substantial change in the exchange rate between the US dollar and the renminbi. Lardy believes that the renminbi holding strong against the US dollar is another sign that the country is not in the midst of a financial crisis.
Lardy concludes that China is simply experiencing a correction in its overinflated equity market—an equity market that historically has not been shown to be positively correlated to China’s real economic growth.
Nicholas R. Lardy, Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics, is author of Markets over Mao: The Rise of Private Business in China.