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Tuesday 20 Feb 2018 | 12:28 | SYDNEY
Tuesday 20 Feb 2018 | 12:28 | SYDNEY

Murphy's Law and China's growth



27 February 2012 15:26

I've noted before on The Interpreter the dramatic shift in the nature of the world economy from the 2003-2007 mini-golden age to something that is currently much less congenial.

In a new paper, I suggest that one way to think about the post-crisis world economy is to see it as at times involving the prolonged and vicious application of Murphy's Law: in other words, whatever can go wrong with the world economy, has. Every time we think that we are about to see the onset of a sustained recovery, another shock comes along – with the Eurozone crisis now the pick of the bunch.

One bright spot in this gloom has been the relatively robust performance of emerging market economies in general and of China in particular. But are we getting China right? In a new International Economy Comment, Alistair Thornton, a China economist at IHS Global Insight, sounds a note of caution. Here's Alistair:

Hardly a day goes by without headlines declaring a soft or hard landing for China. It's one of those topics that everyone seems to have a strong opinion on, and there is little consensus. For obvious reasons, it is of critical importance to the global economy, particularly at a time when advanced economies face significant headwinds.

Digging past China's headline numbers is essential in this regard, not least because of the skepticism surrounding official data. The numbers are of notoriously poor quality, largely because China is a large fast-moving economy with a relatively young bureaucracy, rather than because it suffers from overt political manipulation, although that has certainly happened in the past.

In this International Economy Comment, I try and dig a little deeper, using the Chinese premier-in-waiting's preferred method for gauging growth, and I find evidence of an ongoing slowdown. This is not to call a hard-landing – because in that eventuality a policy response would be aggressive – but to highlight that things are not as stable as they may seem.

Let's hope this isn't going to be another case of Murphy's law in action.

Photo by Flickr user Mal.Smith.

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