Mind you, it helps when you’ve got a government which, if it doesn’t like what’s going on, is perfectly willing to dispense with market forces, suspend trading, ban all selling, and support prices with massive intervention.
Belief that China can avoid such an outcome – which despite these jitters remains the overwhelming view among investors – depends vitally on its continued commitment to such manipulation, or faith in the idea that Chinese policy makers have got it sussed, and that in a centrally directed economy, can influence things in a manner denied to the West’s market-based systems.
I’d say the jury is still very much out on that; there is only so long policy can hold back the tide, which in China’s case is a massive overhang of industrial capacity, property investment and credit expansion.
No doubt there will be some further stimulus from the authorities before too long, both monetary and fiscal, pushing the moment of truth further into the future. But the bottom line is that China hasn’t yet had its correction.
Maybe China has indeed learned how to suspend the laws of economics, but frankly, the biggest mystery is how it has persuaded so many apparently savvy western economists to believe it.
China's long-term continued ascent is not in doubt as it continues to play catch-up with the West. But beware the setbacks along the way.
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