Our long time readers will have known by now that we are skeptics of the China growth story (i.e. that China will pull the world’s economic growth, independent of the United States). We are skeptics not because we have doubts about the probable coming rise of China. Rather, our skepticism, as expressed clearly in Will the China boom go in a straight line?, was one of expectation on how the story will run. We reckon a metaphor is best used to explain our opinion on the China growth story…
Imagine a weak and elderly grandfather and a fit and young bloke are running together. Obviously, the young bloke is going to run much faster than the grandfather. Both are running as fast as they can, in fact too fast for their own safety. Predictably, both of them eventually tripped, fell and suffered painful fractures. For the grandfather, due to his advanced age, took an awfully long time to recover. Even then, the recovery could not restore him to his previous state of health. Sadly, he is confined to a wheelchair for the rest of his life. As for the bloke, due to his optimal health at the prime of his age, that injury proved to be only a temporary setback in his life. Before long, he is fit and fine again, back to his previous self again.
But at that point in time when both of them first got injured, who would you place your faith and optimism on? Obviously, you would choose the bloke. But it is not that easy when it comes to looking at the macro-economic big picture at the heat of the action in the chaotic market.
