Worries about China are overblown
Here are two facts that at first seem impossible to reconcile:
- China is curbing credit growth and cooling the economy
- Today's China CPI report put inflation at just 1.2%, near the lowest since 2009
At times over the two decades, China has had to cool off the economy because of rising inflation but that's not the case right now.
That's because growth/inflation isn't all the government wants. The second part of its mandate is economic stability.
The model isn't price stability or growth, it's total stability. That means taking drastic steps at times to try to avoid bubbles and taking radical measures to ensure a soft landing when hardship is inevitable.
At the moment, the aim is to reduce government and consumer leverage. Of course it's a dangerous game but China has beaten the odds for a long time so it's a mistake to bet against them until problems are undeniable.
