What Kind of Landing for the Chinese Economy?

Rarely has the outlook for the Chinese economy been so contested. Th e fi nancial press widely quotes three alternative perspectives on the short- and medium-term outlook. One school argues that the Chinese government's recent eff orts to rein in overly rapid growth are working and that the economy is now on a glide path to what is referred to as a soft landing. While "soft landing" is usually not fully defi ned, its chief feature in this case is that Chinese economic growth slows modestly from its current pace of 9 to 10 percent to around 8 percent and that the rate of job creation does not slow enough to constitute a major political challenge for the regime. At the other end of the spectrum is the hard landing school, which argues that the authorities to date have not tightened suffi ciently, that loan and investment growth remain excessive, and that the authorities soon will be forced to take more drastic action that will trigger a sharp correction. Finally, the no landing school argues that China's eff orts to slow growth modestly are misguided since the economy was not overheating in 2003 and early 2004. In this view, China is in the early stages of a secular boom that has several additional years to run.