What’s Really Happening in China in 2016: An insider’s perspective on Western media reports
Guest post from Ethan Prizant, Aperian Global Project Manager, Shanghai, China
China’s economy has been on everyone’s minds in recent months, especially at the outset of 2016. Talk of the country’s slowing GDP and the nauseating performance of the Shanghai stock exchange have sent global financial markets into mass disarray. Media outlets around the world have been fixated on the narrative of China’s economic catastrophe. Everyone from financial analysts and investors to economists and business leaders have lent their voices to the general cacophony, putting forth forecasts and exhortations as they fumble to understand what exactly is going on. Most notably, prominent hedge-fund billionaire George Soros sparked more fear and debate after he commented at the World Economic Forum in Davos that the Chinese economy is ineluctably headed for a hard landing. He has been observing it happening.
While much of the world outside China is breaking into cold sweats with each passing news story about China’s ailing economy, skepticism towards this type of reporting prevails inside the country. As one Chinese who lived in Europe before moving back to China in the early 2000s told me,
“I’ve rarely read anything optimistic about China and the Chinese economy.”
This is a refrain I’ve heard time and again from Chinese friends, colleagues and businesspeople who prefer to ignore the foreign media’s take on China, which often harbors inherent bias. Instead of shying away from 2016, the General Manager of one manufacturing MNC is bullishly increasing his revenue targets and remains confidently optimistic about growth in his sector.
Most Chinese still have confidence in their government’s ability to solve the economic problems that arise, even if they may not agree with all of the government’s policies. A Chinese sales representative for a global telecommunications company in Beijing told me he trusts the country’s leadership, which he said has “faced bigger crises than the ones they currently face today,” and still has always kept the country moving forward. Therefore he is confident that they will do so again. A young financier in Jiangsu province acknowledged the disturbingly high levels of non-performing loans for Chinese manufacturers, and yet when asked about the slowdown, he readily cited the government’s extensive foreign reserves and heavy hand in manipulating the marketplace as safeguards against an economic collapse. Although the economy is undergoing a dramatic shift from a state-dominated system to a market-directed system, there remains confidence in the government’s ability to guide the country through this tough economic change without a dramatic downturn.
These local perspectives ask us to consider China’s slowdown in a more multidimensional way. We must go beyond the ups and downs of financial markets and one-sided newspaper headlines and take into account the complexity of the economy as a whole. Pundits who opt for a more holistic, cool-headed view on China’s situation include prominent economist Joseph Stiglitz. He writes that China is undergoing a slowdown, but it is not cataclysmic and will be a slow process. McKinsey’s Jonathan Woetzel echoes this more balanced view of a China that is experiencing growing pains but not heading towards disaster, writing that “China’s growth is slower, but […] the sky isn’t falling”. Another China market analyst, Gordon Orr, cautions us not to focus too much on “short-term noise” about China’s GDP growth and points instead to the fact that success in China depends now more than ever on the parts of the economy where you compete, rather than on macro-trends (Chinese movie box office growth being a prime example of a sector where the opposite of a slowdown is occurring).
In short, there’s a clear differentiation between those inside and outside of China with respect to confidence in the Chinese economy. While the rest of the world panics, the Chinese remain unperturbed, or as the Qing dynasty saying goes: the eunuchs are more worried than the emperor (皇帝不急太监急). Whichever way the economy may turn, it seems safe to say that right now the minds of Chinese will be focused on the week-long Chinese New Year holiday, with festivities and wishes for an auspicious Year of the Monkey.
Three key actions to keep in mind when reading bad news about China:
- Question Your Media – Approach the media with healthy skepticism. Be aware of potential cultural and political biases that influence the West’s reporting on and about China’s economy.
- Frame-Shift – Step back and try to analyze the issue from a different perspective. Bear in mind that China is a complex, multi-faceted market. There may be other valid ways to interpret and analyze a problem. If possible, try to get a local’s perspective on the issue.
- Don’t Polarize Yourself – Be cognizant that your normal is not their normal and there’s no right or wrong way. China is neither Europe nor the U.S. It has different principles and norms for intervening in and planning the economy.
If you are interested in more in-depth knowledge on China and Chinese business culture, we encourage you to check out our Working With Country X learning programs.
ABOUT THE AUTHOR
Ethan Prizant is Aperian Global’s Project Manager at the Shanghai office in China. He is responsible for managing the design and delivery of customized learning programs in China and globally. Ethan holds a Bachelor of Arts in China Studies from the University of California Berkeley and a Graduate Certificate in Chinese Studies from The Johns Hopkins University – Nanjing University Center for Chinese and American Studies in Nanjing, China. Ethan is professionally proficient in Mandarin Chinese and currently based in Shanghai, China.
Burton, Katherine, “Soros Says China Hard Landing Will Deepen the Rout in Stocks,” Bloomberg, January 22, 2016, http://www.bloomberg.com/news/articles/2016-01-21/george-soros-says-he-expects-hard-landing-for-chinese-economy.
“China Not Facing ‘Cataclysmic’ Economic Slow Down, Says Stiglitz” Bloomberg, 11 Jan 2016, http://www.bloomberg.com/news/articles/2016-01-11/china-not-facing-cataclysmic-economic-slow-down-says-stiglitz
Woetzel, Jonathan, “Five Myths About the Chinese Economy,” McKinsey Quarterly, Nov 2015, http://www.mckinsey.com/insights/winning_in_emerging_markets/five_myths_about_the_chinese_economy
Orr, Gordon, “What might happen in China in 2016?” McKinsey Insights, January 2016, http://www.mckinsey.com/Insights/Strategy/What_might_happen_in_China_in_2016?cid=other-eml-alt-mip-mck-oth-1601