China crash unlikely but India’s outlook less rosy

WE all know that there is an endless list of people, at least based on what is being reported in the Western mass media, forecasting that China’s economy will crash soon.

Based on the latest April data on China’s property price, bank lending and inflation rate, it would appear that all the dire forecasts for China are unfolding right in front of our eyes.

As i Capital has advised repeatedly, it does not see China crash landing this or next year. In fact, it continues to see a soft landing in the coming months.

By focusing on China, what the China bashers have not shown is that between the two emerging Asian giants of India and China, India should be the economy that is heading for a crash.

The three charts above show key economic statistics for these emerging giants.

India’s situation is somewhat similar to Greece. She has persistent and high levels of budget deficit, external trade deficit and also a high inflation rate.

In contrast, China’s economy is better managed. Despite such contrasting economic performance, why is it that China is forecast to crash and not India?

Is it because China has some problems with some minorities? The China bashers love to highlight Tibet and Xinjiang as China’s major trouble spots. This cannot be because the social problems that India faces are even more serious than China’s.

In 2006, Prime Minister Manmohan Singh called the Naxalites “the single biggest internal security challenge ever faced by our country.”

In 2009 he said that India was “losing the battle against Maoist rebels.” The Naxalites are very popular and growing in popularity in India. So why zoom in only on China?

The answer is simple.

To the China bashers, India is seen as a rare Asian democracy which they will go all out to portray as the model nation.

In contrast, China is still portrayed as a communist country and they would go all out to discredit her as a successful nation, and if possible to cause the country to break up.

Unfortunately, the facts of the matter do not support such a conclusion.

No matter how one looks at it, China’s economy is not ready to crash.

Based on anecdotal evidence, the property bubblet is already being busted. Property prices are already peaking.

The numerous measures need time to take effect.

The economic and housing data in the coming months will be more reflective of the underlying trend and thus more accurate.