Don't blame the Chinese economy

When asked to comment on reports that he was dying in poverty in 1897, Mark Twain replied in a letter that ended: "The report of my death was an exaggeration." The same may be said about today's Chinese economy, which, while slowing, is definitely alive and kicking.

During the half century that I've been studying modern China and its economy, perceptions of that economy in the rest of the world have been reversed, and then reversed again.

In the 1960s and 1970s, the Chinese economy was ignored as irrelevant because it was small and closed. China's GDP was far less than that of a small country such as Belgium. And trade accounted for only a few percentage points of that GDP. When I tried to sell myself to companies on the basis of China's enormous economic potential, I was treated (to put it politely) with extreme skepticism.

Fast forward to the 2000s and China, now one of the most open economies in the world, had long been "flavor of the month" with foreign investors and was said to be about to become the world's largest economy. The world had previously been accustomed to saying that when the United States sneezed, the rest of the world would catch cold. It was now saying that Chinese super-growth of 10 percent a year would pull the world out of recession.

But when China's GDP recently slowed to "only" 7 percent a year, which statement became a negative one: when China sneezes, the rest of the world catches cold.

For the policymakers and central bankers in China, this must look rather strange. One minute, they could well say, you are complaining bitterly that China's rapid economic expansion is driving up the prices of energy and raw materials, not to mention real estate prices in London and New York, the next minute you are blaming us for your failure to recover from a recession that we had absolutely nothing to do with.

Though I am not famous for agreeing with everything the Chinese government does, I have a lot of sympathy for this latter viewpoint.

Yes, the fall in the Shanghai Composite Index and in the yuan exchange rate has contributed to the developing bear market in Western countries, though there are plenty of other factors. Yes, economies that are dependent on exporting oil and industrial raw materials to China are suffering from slacker demand expansion there.

But no, China is not responsible for the complete bloody mess that includes the Euro zone debt crisis, the short-sighted failure of countries such as Russia to diversify out of oil and gas, the complete exhaustion of recession remedies (primarily "quantitative easing") in the United States and Britain, the failure of other "BRICS" or "Emerging Market" countries (Brazil and South Africa come to mind) to achieve sustainable development, and many other problems that cannot be put right by actions of the Chinese authorities.

While China's economy remains far from perfect, it is still doing much better than in earlier periods of its post-1949 development, and far better than most other economies around the globe.