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The Temptations of a Resilient China

NEW HAVEN – Another growth scare has come and gone for the Chinese economy. This, of course, is very much at odds with Western conventional wisdom, which has long expected a hard landing in China. Once again, the Western perspective missed the Chinese context – a resilient system that places a high premium on stability.

Premier Li Keqiang said it all in his final comments at the recent China Development Forum. I have attended this gathering for 17 consecutive years and have learned to read between the lines of premier-speak. Most of the time, senior Chinese leaders stay on message with rather boring statements about accomplishments, targets, and reforms, toeing the official line of the annual “Work Report” on the economy that is delivered to the National People’s Congress two weeks earlier.

This year was different. Initially, Li seemed subdued in his ponderous responses to questions from an audience of global luminaries that focused on weighty issues such as trade frictions, globalization, digitization, and automation. But he came alive in his closing remarks – offering an unprompted declaration about the Chinese economy’s underlying strength: “There will be no hard landing,” he exclaimed.

The all-clear sign from Li was in sync with official data in the first two months of 2017: solid strength in retail sales, industrial output, electricity consumption, steel production, fixed investment, and service sector activity (the latter signaled by a new monthly indicator developed by China’s National Bureau of Statistics). Meanwhile, foreign-exchange reserves rebounded in February for the first time in eight months, pointing to an easing of capital outflows.