Writing for Bloomberg View, Jim O’Neill, the former chairman of Goldman Sachs Asset Management International, has argued that it is “ridiculous” to be bearish on China in 2015, commenting that there is a big year ahead for the economy.
In comparison to his earlier predictions of the BRIC countries – Brazil, Russia, India and China – it is the latter economy that has met Jim’s expectations five years on. He explains that “assuming that China’s soon-to-be-published fourth-quarter gross domestic product number will come in at or close to 7.3 percent, as many experts assume, then from 2011 to 2014, China will have averaged real GDP growth of just less than 8 percent.”
Jim offers three basic reasons to be bullish on China:
- First, the collapse of crude oil prices will boost consumers’ real incomes, helping them play a larger role in the economy.
- Second, even though property prices have recently stalled and begun to fall, China will probably avoid a serious credit crunch, partly because Chinese policy makers have been more serious about restraining prices before they can collapse.
- A third reason to be optimistic is the subdued nature of inflation in China. This allows for more accommodative monetary policy going forward.
Jim notes that taken together, “these factors will make it easier for China to rebalance its economy — by raising wages, increasing property-ownership rights for urban migrants and reforming pension systems.”