Those of us who live in China take it for granted that it is not the “miracle” often portrayed in media reports. Changes over the past thirty years have been vast indeed, but as this blog’s posts of the past two years suggest if not directly say, China’s still got to straighten up its act in terms of corruption, human rights, and legal culpability before it can be considered a truly astounding and laudable accomplishment.
This type of banter may seem like the intellectual musings of someone too deep in her China-head; someone who just never “got over” the fact that she gets cut in line every time she waits for the bus (and subsequently goes off on a tangent about the cultural causes of this phenomenon), or can’t get good service at a restaurant, or hears another story about some poor handicapped man being arrested for begging in front of a government official’s cousin’s one-year-old son’s birthday banquet. Oftentimes, it is the business people who wax the most lyrical about the return on their China investments, equating their capital gains with China’s progress. While this is not at all unreasonable, it does certainly leave out half — if not more than half — of the China-story.
This is why I’ve started to perk up when stories of China skepticism appear in Western media sources, particularly the likes of Forbes and the Wall Street Journal. Junheng Li, an investment analyst and founder of JL Warren Capital LLC, has recently launched a new Forbes blog Due Diligence that specifically aims to challenge the presence of gold pots in China’s bowl of Lucky Charms. What she witnesses time and again at conferences is the well-groomed enthusiasm for certain businesses in China, as if tapping in to the stock-picker’s “conventional wisdom” that China = financial opportunity. After a while, it starts to look like a circus.
More on that in her future posts and eventual book. Michael Pettis of the Carnegie Endowment gave a speech at the Australian Investment Conference last year along the same lines: not China-bear, just critical. This type of well-informed, specific and refined skepticism hits China’s image where it matters most: its so-called economic miracle. Muddy Waters, an investment research firm, has made a killing off of stoking China-skepticism for years. While their research raises questions of Chinese cultural issues versus Western understanding of business practice (i.e. misconstruing Chinese cultural habits for bad business practice; see a criticism here), I think we will be seeing increasing amounts of skepticism towards China’s economic promise in the future. China may be sitting on a golden nest of US loans, but it has enough of its own domestic issues with government corruption, nebulous banking practice, and FDIC-not-insured that those eggs may just crack under the bird’s weight.
So keep a feel on the media’s pulse for China, as it may just be taking a turn in the near future.