Also, there was a pretty good article from Robert Samuelson in the Washington Post last Thursday: " The China Bubble Pops."

I like it because he actually starts to talk in terms of projected future numbers, whereas most articles just quote market numbers and make declarative judgment statements.

quote:
China is such an economic colossus that a few percentage points shaved off its growth can have enormous effects. Consider the numbers: From 2007 to 2011, China’s annual economic growth averaged 10.6 percent, says the International Monetary Fund. For the next three years, the average was 7.6 percent. The figure for 2015 is widely estimated at 6.9 percent. The fallout is now spreading.

Although China has a massive trade surplus, it’s also a huge importer — almost $2 trillion worth in 2014 — and so its slackening demand is a major cause of the global crash in oil and commodity prices.

quote:
Without predicting this sort of calamity, some observers see the present slowdown as the start of a long descent. “China is going to stagnate,” says Derek Scissors, a China expert at the American Enterprise Institute. That doesn’t mean a collapse, he says, but rather a slow drift to growth rates of 1 percent to 2 percent. These would equal today’s American and European rates, even though China won’t have caught up with U.S. and European living standards.

China faces two problems, says Scissors, that dampen economic growth: high debts and an aging and stagnant population. The older population will shrink the size of the labor force; fewer workers will crimp the economy’s output. (Between 2015 and 2040, China’s working-age population — ages 15 to 64 — will fall by about 14 percent, projects the U.S. Census Bureau. That’s nearly 140 million people.)

Meanwhile, debt — for households, businesses and government — soared by $20 trillion in the past eight years, says Scissors. Debt service will squeeze borrowers’ ability to spend and propel economic growth.

In theory, more innovation could overcome both problems. But Scissors dislikes China’s prospects, because the Communist Party won’t fully embrace free markets and doesn’t protect “intellectual property” (patents, copyrights: the fruits of innovation).

I like Scissors's argument, even if I think the 1-2% growth numbers might be a little drastic. The counterargument in the article is given by Nicholas Lardy of the Peterson Institute, who claims that the improved social safety net in China will help with future domestic consumption spending, and that the housing market drop will only have a temporary hangover effect.

I tend more toward the Scissors argument, but I would guesstimate a future growth trajectory of closer to 4% than 1-2%, but 4% would be pretty horrible for an economy with a per capita GDP of only $12,000 in PPP terms.