23rd August 2010
China's economy is still growing by more than 10% annually, and its industrial output soared by 13.4% in the year to July. The trade surplus hit $28.7 billion in July – the highest level in 18 months – and the 12-month surplus of $175 billion was the world's second largest, after Germany. What's not to like about that?
Yes, it's undeniably true that Shanghai's Composite index has fallen by 19% since January (although the dollar-denominated "B" index has lost only 4%).
And it's also true that the government's 4 trillion yuan ($600 billion) fiscal stimulus programme is definitely being wound up this year – partly because the banks who've funded it are creaking, and partly because Beijing is becoming genuinely concerned about inflation, which hit 3.3% in the year to July, against minus 1.8% a year ago. (Ouch.)
But the bigger picture tells a different and more optimistic story.
Virginie Maisonneuve, Head of Global and International Equities at Schroders, is in no doubt about that. China has now officially overtaken Japan to become the world's second largest economy in dollar terms, she says – and that's significant for two reasons.
"Japan's currency is at a 15 year high", she says, "and that's hurting Tokyo's export industries and making China's own exports more attractive than ever."