Matthews Asia – China: What If The Sky Isn't Falling?

Perhaps the key takeaway from the just published third quarter China macro numbers is that the sky didn’t fall. Back at the start of the year, consensus seemed to be that by now, China’s foreign exchange reserves would be depleted (they remain the world’s largest, at over US$3 trillion) and the currency would have experienced a dramatic devaluation (it fell just 2.8% against the dollar during the first nine months of the year).

Instead, third quarter data signaled that economic growth has stabilized at a healthy pace, and that China’s transition—from a high-speed, heavy industry-based economy to a moderately-fast consumer and services-based economy—is well underway. The challenges of completing this transition will result in gradually slower growth rates and increased volatility,...