China

Big News From China: Its Implosion Didn't Happen

Somehow the nation once seen as a major swing factor has become the rock on which global growth depends.

Address your thank-you notes to Zhou Xiaochuan.

Photographer: Lintao Zhang/Getty Images

China's economic performance is all about what hasn't happened. That's huge.

The world's No. 2 economy didn't implode under a mountain of debt, nor did trade tensions with the U.S. bring exports undone. And there certainly hasn't been the trade war many feared a year ago. The country's growing reliance on services and consumption as an engine of growth -- a little-understood phenomenon in the West -- wasn't reversed. Kudos.

All of these non-events add up to a big deal: The place that accounts for more than a third of global growth is showing remarkable economic resilience and is even picking up a tad. That's in part a product of, part a contributor to, the synchronized global upswing we hear so much about. Gross domestic product rose 6.9 percent in 2017, up from 6.7 percent a year earlier. Things looked pretty good as the year drew to a close; GDP gained 6.8 percent in the final three months of the year.

Sure, there are folks who say the numbers are cooked and that it's all just a matter of time before the Chinese model comes unglued. And it might happen. The figures do, to be fair, show a remarkable stability at the headline level, as my colleagues in Bloomberg Economics have pointed out. It's also true that China critics have been singing the same tune for a while now and the country hasn't collapsed. The worst hasn't come remotely close to passing.

So China has gone from a swing factor in the global economic order to something more like the rock underpinning the global outlook. A great reason for policymakers around the planet to fire off some thank-you notes before People's Bank of China Governor Zhou Xiaochuan's likely retirement this year.

There are two lessons from all this. The first is that the global economy is an incredibly interconnected and complex place and can't just be undone by slogans like "the end of globalization" that were so trendy a year ago.

The second is broader than economics: China puts experienced policy practitioners in charge, from the president's office on down. They do the hard work and don't rejoice in sowing chaos and confusion. As a result, China is a source of stability, not a threat to it.

Acknowledging this is not the same as becoming a China cheerleader. China faces significant challenges, not least of which are environmental degradation along with an aging and shrinking workforce. But as one travels around the world and talks to policymakers, investors, and current and former officials, there is the unmistakable sense that China is on the rise and the West … well, "muddling through" is probably a charitable way to put it. 

Few serious people think that the U.S., a proxy for the West, is remotely capable at this juncture of launching something on the scale of the Belt and Road Initiative. More corrosive is an idea becoming fashionable that democracies just can't do big things any more. We'll see how that plays out. Declinism is rife throughout American history -- and yet the U.S. keeps bouncing back.

Still, this moment does belong to China. Economics numbers like those we saw this week undergird that notion. On my wish list: stirrings of inflation. They'll have to come eventually. Want to bet they'll emanate from China?

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Daniel Moss at dmoss@bloomberg.net

    To contact the editor responsible for this story:
    Philip Gray at philipgray@bloomberg.net

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