MSNBC Report: The Sky Isn’t Falling In China

Monday, March 5, 2007 10:38
Posted in category The Big Picture

Call me an eternal optimist if you like, but Fareed Zakaria of MSNBC are of the same mind. The Sky Isn’t Falling in China.

Using the recent Shanghai stock market dive (and the resulting headlines around the world) as a basis to write his article, Zakaria looks to highlight the information gap that exists in the West about the Middle Kingdom (something that this blog hopes to bridge).

He smartly recognizes the economics of the market, and that 150% in 6 months is going to lead to someone taking their profits out, and he points out something very interesting that many may not realize:

….there is little linking the Shanghai stock market with the overall Chinese economy. It simply doesn’t play the role that the stock market does in the United States or Britain. Most Chinese companies raise money through banks, not equities. Indeed, for the past 10 years, Chinese stocks have gone down while the economy has boomed.

For those of you that had not heard this before, consider the fact that until 6 months ago, China actually had the ONLY stock market in the world with negative returns while having sustain positive GDP growth.

In the next couple of paragraphs he highlights the quoted from a few key scholars/ economists to try and show that China is different (some say backwards) from the traditional model. That to have a booming economy you do not have to have a clear legal system, or strong property rights, or free floating economies.

However, I will interject here by saying China has defied gravity, but that they are keenly aware that even while walking on the moon one will come back to earth… in other words, hyper growth can be created in many models, but I think Greenspan was speaking more to the long term sustainability of economic growth.

The story wraps up with more about the differences between perception and reality when it comes to the minds of Americans (his primary reader), and I think he does a good job of opening the door. I hope that he and other writers will continue along the same path, and this article itself will not be the lone ranger of China articles.

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One Response to “MSNBC Report: The Sky Isn’t Falling In China”

  1. China Law Blog says:

    March 7th, 2007 at 8:32 am

    I love reading articles on China by people like Zakaria. He understands the world and it is good to have a non China person look at China sometimes to give us the big perspective/comparative perspective sometimes lacking in those who always write on China. Thanks for the good link. The WSJ did a similar piece a few days after Black Tuesday.