China's economy may be cooling somewhat from its three decades of blistering growth, but will this process get out of control and morph into some kind of a much sharper scenario? Will there be a crisis or hard landing looming as some China doubters touted? How to candidly assess the current state and outlook for the Chinese economy?
Thomas Byrne and Doug Guthrie, two world-renowned economists and veteran China watchers, recently shared with me their takes on these questions.
"We don't think China is on the cusp of a financial crisis," said Byrne, senior vice president at Moody's, one of the world's big three credit rating agencies.
Local government debt is an issue that has drawn widespread attention. By the end of June, outstanding loans via local government funding vehicles stood at 9.7 trillion yuan ($1.57 trillion), up 6.2 percent from last year.
Byrne thinks the risks of local government funding vehicles are somewhat under control and will not trigger crisis in the Chinese economy.
"There was a lot of credit extended through the banking system. That seems to be more or less contained," Byrne, who is also a senior sovereign analyst, told me.
"There is still progress, and the risks of these finances may or may not oppose to the central government finances. Central government finances are relatively strong."
In regard to the current state and outlook for the Chinese economy, Byrne voiced his views.
"The outlook is stable, at an Aa3 rating, which is a high rating. We took off the positive signal that may move up. And we put a stable signal. We kept the stable signal."
Byrne's judgment was echoed by Doug Guthrie, dean of the George Washington University School of Business and a Western expert in China's economic reform.
"I think there're a lot of things that need to happen for the development of this consumer-based economy. But, I think that China's position is still pretty healthy in this market."
The Chinese government has expressed confidence in achieving its 7.5 percent growth target this year, and a new batch of better-than-expected official data for July has already shown signs of recovery. If China can keep the momentum going, it will continue to power the world economy from a medium- to long-term perspective.
(This is a reprint from the People's Daily Online of the August 19, 2013 edition.)