Will China Slow Global Growth?

Or will the Fed reverse course to save the world economy? (no paywall)

Happy Labor Day with deepest thanks to our loyal subscribers and valued readers who make our work possible. To celebrate, we are sharing our August 19th Hale China Report with paywall removed. Our next report will be published this weekend.

China Beige Book’s survey released today supports our recent call that China’s economy has bottomed out, buttressed by a series of policy moves designed to stimulate the economy:

“Consumer spending bounced back in August after a tepid July, per @ChinaBeigeBook’s survey…All five categories—apparel, automotive, food, furniture and appliances and luxury—saw a marked increase in sales this month, versus July, the report said.” @shehzadhqazi - CNBC

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(August 19, 2023) After a bad week in global markets widely attributed to a slowdown in China, it might seem contrarian to say that the negative take on China’s economy is overdone. I could be early making this call, but in my experience the difference between being too late and too early is approximately 15 minutes in China.

World Bank Economic Outlook 2022

In January I wrote that China’s economy would not rebound as quickly as everyone thought. Now a persistent Chinese downturn with possible global contagion has become the mantra. So it was with a sense of relief that I saw pushback from Nick Lardy, the highly respected economist who follows China’s financial sector at the Peterson Institute for International Economics:

A new consensus has emerged among many economists, journalists, and other analysts regarding the current slowdown in the Chinese economy. Their contention is that China's stumbles in spring 2023 portend a far more serious long-term problem derived from flawed, insular, and Communist Party-controlled policymaking in response to COVID and its aftermath, with likely adverse consequences for the global economy.

That widely popular assessment is likely premature and, at least in part, perhaps simply wrong.