Misconstruing China’s slowdown as collapse is damaging

China’s slowdown was predictable and necessary but its reactionary policies and inaccurate expectations created by the markets are creating a dangerous perception, writes Anatole Kaletsky

ONE question has dominated the International Monetary Fund’s annual meeting this year in Peru: Will China’s economic downturn trigger a new financial crisis just as the world is putting the last one to bed? But the assumption underlying that question — that China is now the global economy’s weakest link— is highly suspect.

China certainly experienced a turbulent summer, owing to three factors: Economic weakness, financial panic, and the policy response to these problems. While none on its own would have threatened the world economy, the danger stemmed from a self-reinforcing interaction among them: Weak economic data leads to financial turmoil, which induces policy blunders that in turn fuel more financial panic, economic weakness, and policy mistakes.