Taking a good, stand-back reading of the Chinese economy is always a difficult task, especially if one’s spectacles do not happen to be of the rose-tinted variety. For nearly three and a half decades now, the pessimists about the outlook for the Chinese economy have been uniformly wrong.
At the same time, the economy is slowing to an expected 7.4 per cent this year and the country is also facing challenges of government and corporate debt. Economic growth is on track for the weakest annual pace in 24 years. The days of double-digit percentage expansion are gone.
Stepping off the high-speed train, which whisks the traveller from China's capital Beijing to its financial hub Shanghai in comfortably less than five hours, it's hard to feel bearish about the prospects for the world's second biggest economy.
The city is busy, lots of new cars, few signs of the kind of creeping decrepitude that plagues many cities in Europe and the United States.
Across the river, in the almost entirely new city precinct of Pudong, workers have just topped off the Shanghai Tower, currently the world’s second-largest skyscraper.
The building reached its full height of 632 metres as the final beam was hoisted atop the 137-floor building's 20-storey crown structure, according to a report in the People's Daily.
The story in the Communist Party's main organ ran under the headline "Workers celebrate the completion of Shanghai Tower", a reminder that China is still a socialist country. The building is set to be completed in 2015.
Recent weeks have seen some downbeat indicators, particularly last week’s credit data, adding to the jitters.
Money supply, which is China’s broadest measure of new credit, was weaker than expected, falling to its lowest level since the 2008 financial crisis.
New loans in local currency of 385.2 billion yuan (€46.82 billion) were half of what analysts had expected, while M2 money supply grew a less-than-anticipated 13.5 per cent from a year earlier.
Aggregate financing was 273.1 billion yuan (€33.2 billion) in July, the People's Bank of China said, compared with the 1.5 trillion yuan (€180 billion) that analysts polled by Bloomberg had been expecting.
"Just as we cautioned against over-interpreting the government's policy and monetary easing, we similarly caution against over reacting to July's surprisingly weak credit data," said UBS China analyst Wang Tao in a note.
“We do not see these as evidence of credit tightening and expect August credit numbers to improve,” she said.
Capital Economics China economist Qingwei Wang said the data suggested the economy may be starting to lose some momentum following a strong second quarter.
“While an across-the-board stimulus is unlikely, we think the government will continue to provide further targeted support to sectors of the economy that are struggling the most,” said Wang.
Former World Bank chief economist of the World Bank, Justin Yifu Lin, is out-and-out bullish on China's prospects, believing the country has the potential to maintain economic growth of between seven and eight per cent for at least another two decades.
In an interview with Business Spectator, Lin pointed out just how far China still has to go.
In 20018, per capita income in China was only 21 per cent of the US, which is where Japan was in 1951, Singapore in 1967, Taiwan in 1975 and South Korea in 1977. Based on the growth pattern seen in these countries, China still has another two decades of expansion to come, with growth of eight per cent per annum a possibility for another 20 years.
“China has the potential but it does not necessarily mean it can fully utilise that potential. However, if you don’t have that potential, there is no way for you to achieve anything regardless of how hard you may try,” he told Business Spectator.
Another talking point here in Shanghai is the coming launch in October of Premier Li Keqiang’s Shanghai-Hong Kong Stock Connect, or “through train” scheme.
Shanghai’s index has been in the doldrums for years now, but it has been rising in the past few weeks, and investors believe it is on track to come in ahead in the full-year.
The scheme allows global institutional and retail investors to trade Shanghai ‘A’ shares via the Hong Kong stock exchange. Currently only institutional investors abroad with secured quota from the government can invest directly in China’s domestic markets.