Skip to content

Debating a “Hard Landing”

March 24, 2012

This Thursday, March 22, The Guardian (of the UK) published a friendly email “debate” between Andrew Batson, of Gavekal Dragonomics, and me over whether China’s economy faces a “hard landing” in 2012 — with me arguing that it does, and Andrew that it doesn’t.  You can read our exchange below, or access the original here.

Should China be bracing itself for a hard landing?

The China bears grow ever gloomier, while the bulls maintain their confidence. So will the world’s second largest economy see a hard landing in 2012 or can its leaders steer a steady course? Patrick Chovanec of Tsinghua University and Andrew Batson of Beijing-based consultancy Gavekal-Dragonomics debate.

Dear Andrew,

There really are two related but distinct things people have in mind when they talk about a “hard landing” for China. The first is a rapid deceleration of GDP growth – below, say, 7%. The second is some kind of financial crisis. I think we’re already seeing some signs of the first, and the second is a bigger risk than most people appreciate. For the past several years, most of China’s GDP growth has come from a massive investment boom fuelled by easy credit. Unless China sees a major increase in export demand – highly unlikely – or a huge shift towards domestic consumer spending – a lot easier said than done – the only way to hit 8-9% growth is to keep that investment boom going like gangbusters. The problem is, all that easy credit is generating bad debt and inflation. The state banking system can brush bad debt under the rug, but the more bad debt gets rolled over, the less capital is available to fund new projects. The only way to keep the investment boom going is to dramatically expand credit. That would spark inflation and further distort the economy, which China’s leaders know they can’t do. They’ve painted themselves into a corner, and something has to give. Even though the money supply is expanding at a fairly generous rate it’s still not enough. That’s why real estate is collapsing and ambitious public works, like urban subways, are hobbled by lack of funds. Last year, out of China’s 9.2% real rate of GDP growth, five percentage points came from investment in fixed assets. If China builds all the roads, bridges, ports, airports, high-speed rail lines, condos, villas, etc this year that it built last year – an absolutely astounding amount of construction – but NO MORE, GDP growth would fall to just 4.2%. That’s a “hard landing” by anyone’s definition, and from what I can see, it’s already under way. Best, Patrick

Dear Patrick,

You are right to identify a crunch in investment as the main risk that could cause a sharp slowdown in GDP growth. It is true that about half of China’s economic output is investment, so if there is zero growth in investment then overall GDP growth will be cut sharply just as a matter of arithmetic. The question is then whether investment growth in China is really going to go to zero, and here I do not think you have presented a convincing argument. Investment in China is not driven simply by the supply of loans from the state banking system, but also by the very strong demand for investment opportunities. China has an enormous urban housing shortage (on the order of 70m units), regional electricity shortages and one of the world’s most crowded railway systems – not to mention thousands of manufacturers busily automating to offset rising labour costs. In short, there are plenty of things China can usefully invest in. Secondly, it is simply not true that investment is collapsing despite the best efforts of officials desperately trying to keep credit growth going. The investment cycle in China is clearly correcting after the huge stimulus in 2009-10: real growth in fixed asset investment slowed to 15% year-on-year in the last quarter of 2011, from a peak of over 40% growth in mid-2009. But this slowdown is happening precisely because the government is pulling back. The wave of new stimulus projects in 2009 was a one-time event that is not being repeated, and bank regulators have clamped down on credit growth because of worries about inflation and financial risk. Money supply growth has come down from a peak of nearly 30% year-on-year in mid-2009 to 12% in January 2011. In short, this looks to me like a cyclical downturn brought on by tighter monetary policy, and not a “hard landing” or crisis. Best, Andrew

Dear Andrew,

A developing country like China has plenty of things in which it could profitably invest. But I could name any number of countries, over the years, all at a lower development level than China, which nevertheless made wasteful investments and ended in trouble. We know already, from the collapse in the property market and the rising loan rollovers at banks, that many of the investments made over the past few years are not paying back. The last time China saw this kind of lending binge, in the 1990s, 35% of the loans ended up going bad. The problem isn’t China, it’s the inefficiency of its state-run banks and the state-run companies they lend to. I agree that some Chinese policymakers recognise this problem, and have tried to rein in runaway credit. But that led to two problems. First, the burden of tighter credit fell disproportionately on the private sector, the most productive part of the economy. Entrepreneurs paid exorbitant interest rates or got cut off entirely, while politically driven projects continued to get money on preferred terms. Second, while Chinese regulators did succeed in reining in formal lending, banks and speculators – often working together – cooked up all kinds of ways around these constraints. Last year saw an explosion in off-the-books “shadow” banking, including the repackaging of questionable loans into risky investment products that were then marketed and sold to the general public. We’ve already seen people commit suicide or flee the country in a few cities, like Wenzhou, where this house of cards has taken a tumble, but the same practices are pervasive all across the country. There’s a greater risk of financial instability than most people realise. Best, Patrick

Dear Patrick,

Of course there are problems in the Chinese economy that need addressing. It is clearly true that China’s state-owned enterprises are less efficient than private-sector companies, and that private companies have real difficulty getting loans from the state banking system. To the extent that China can fix this problem, it will only improve its prospects for future growth. While this inefficiency may well be a drag on China’s growth, is it such a burden that growth must come crashing to a halt this year? I think this is implausible. In the key industrial sector, corporate profit margins are now steady around 6%, the same level they have maintained for years. If Chinese companies were really burdened with lots of investments that “are not paying back,” shouldn’t they be losing money? Similarly, housing sales are now falling mainly because the government has put in place policies that prevent many people from buying houses; this is hardly evidence that investments in housing are massively unprofitable. This does not mean there will not be bad loans resulting from the huge amount of stimulus lending. Clearly, China’s government has accepted some bad loans as a price it was willing to pay to keep growth going during the global financial crisis. (The “shadow” lending explosion took place in 2009 and 2010, and was curbed in 2011.) Banks and the government will have to work off the burden of these bad debts in coming years. All this is a good reason to expect China’s growth rate to be lower in the next few years than in the past few years. It is not a good reason to expect growth to collapse right now. Best, Andrew

Dear Andrew,

We both agree that China’s high rates of GDP growth, these past few years, have been mainly due to an investment boom and that an abrupt end to that boom could spell a sharp slowdown. We agree that the big surge in lending that propelled this boom has created a bad debt burden for banks. We also agree that Chinese regulators have now (as you put it) “clamped down on credit growth” and that investment growth has fallen off as a result. But while you see this as a deft (and ultimately successful) balancing act by Chinese policymakers, I see it more as a wild juggling act, an increasingly desperate effort to keep way too many balls in the air at once. Real estate is a prime example. You credit the recent fall in the market to the government’s restrictions on multiple home purchases. If only it were that simple. Those curbs were put into place nearly two years ago and to the extent they worked at all, merely shifted speculative attention to (unrestricted) second and third tier cities. Developers kept expanding investment by 30% a year, piling up nearly a year’s worth of unsold inventory, confident that the government needed them – and would ultimately support them – to maintain growth. In the meantime, the central bank was reining in credit to counter rising inflation, including spiralling home prices. When developers finally ran out of financing options, they had to start dumping their unsold inventories to raise cash – and the market tanked. Drop one ball and others follow. Land sales – which local governments are relying on to fund basic services, as well as repay their stimulus bank loans – are at a standstill, and some analysts expect private housing starts to fall by 20% this year. I wouldn’t take too much comfort in the reported profits of Chinese firms. Lehman, Bear Stearns, and AIG – not to mention Fannie and Freddie – were all rolling in profits as long as credit was cheap and property prices were rising. That’s the nature of boom/bust cycles: it’s easy to make money when they’re printing it, and nobody’s pressing to be paid back. But as Warren Buffett says, “It’s only when the tide goes out that you learn who’s been swimming naked.” Chinese companies I’ve been talking to, across many different industries, say they’ll count themselves lucky if they can just match last year’s sales in 2012. Sounds to me like the tide’s going out – and I’m betting there are a lot of folks in China who figured they’d never need a swimsuit. Best, Patrick

39 Comments leave one →
  1. Alex permalink
    March 24, 2012 11:48 pm

    Just one question. I remember reading in recent articles that the housing market has fallen, but has fallen with just 1-2%. The figure came from China’s own National Statistics bureau. Is it possible that the housing market would decline only so little? I could understand if it keeps rising, but decline usually means a bubble has popped, and if it a bubble pops it’s usually with a much sharper decline.

    So what’s the secret behind this small decline? I think it’s either that the numbers are actually fudged, or that there are sharper 10-20% declines, but isolated in several cities or areas, so when you average it out it becomes 1-2% for the whole nation. Or, it might be that the transaction volumes are low, i.e. the current prices are not market clearing prices, they’re just the prices sellers wish they could get but nobody’s buying.

    In general, is it possible that a bubble popping can result in reducing transaction volumes instead of prices, and if that is so, how long can it continue that way?

    • April 26, 2012 5:27 pm

      Alex, yours is a question that many industry observers constantly struggle with. Both the National Bureau of Statistics (NBS) and the National Development and Reform Commission (NDRC) numbers are good in terms of telling direction (ie, up or down), but not so good in terms of indicating magnitude. Anyone who has ever bought a property would know that property prices tend to gap, rather than trickle, up or down. Moreover, the government bodies that produce and publish the pricing information do not divulge their methods or data sets used for arriving at their conclusions. Given the public sensitivity to housing price changes, private entities are “discouraged” from publishing independent price gauges or indexes.

      The best available gauge of price movements in China’s residential markets are changes in the average selling prices (ASPs) measured in RMB per sq metre of in the primary** market (ie, initial sale from developer to end-user/investor). Although this measure suffers from the shortcoming of not discerning between drops in the pricing of similar units or changes in the overall sales mix (ie, shifting of proportions between lower end and higher end residential units), it is still the best available as it is based on actual, arms length transactions.

      (**Secondary market transaction data is unreliable in China. There is an almost systematic understatement of prices as both buyer and seller conspire to lower the registered transaction price – ie, the amount on the official documents – so as to minimise transaction taxes and fees. Usually, additional sums are passed under the table as part of the transaction. This makes secondary pricing data far less reliable for comparisons or the construction of price indices.)

      When property markets correct, usually volumes fall first followed by prices. The less liquid nature of property transactions (compared to say stock market transactions) makes this the case. Bid-ask spreads widen and then drift down without any transactions occurring. Once the developers start feeling the pain and discounting, the price likely has gapped down 15-20%. So far in 1Q2012, national transaction value is off 15% YoY while price drops have ranged from 15-20% depending on city.

      Readers should keep in mind that a residential real estate market has only existed in China since about 2000. Since that time, there have been no prolonged property market declines and in hindsight, every dip in prices was a missed entry point. People living through this period have experienced a long bull market and probably have a slightly distorted risk perception of the real estate asset class. This is somewhat similar to the complacency a lot of Americans had about equities throughout the 90s leading up to the tech bubble in 2000.

  2. March 25, 2012 2:36 am

    Thanks guys, nice exchange.

    I was wondering how much impact have/will we see as a result of the ‘cooling’ in land sales? One thing I have never heard discussed is potential impact on budgetary reimbursements to firms under the tax farming system. Given that such rebates are determined ex-post, could this mean that firms could see de facto tax hikes? Is this possible and is it noteworthy for the bottom line for foreign firms?

  3. March 25, 2012 4:25 am

    In the past 2 months we have seen both a softening of inflation and a contraction of production. China has enough at its disposal right now to grow GDP by 7% with no changes to the economy. The danger before was if outside pressures such as Europe further eroded global economy vitality, and thus the number of options available to Beijing. Just as Obama can say Iran is the cause of higher gas prices, China can easily appease people to keep trudging on-if for nothing more than the prospect of beating America (as was in 2009). Further since much of the economy, especially financial sectors, are owned by government members whose lives depend on not having another revolution, are going to take personal financial sacrifices to maintain the economy-such as postponing maturity dates on 10 year notes whose book values are devoid of default risks.

    Is there substantial risk of a popped bubble in China? Yes. But it won’t happen this year.

  4. March 25, 2012 5:41 am

    Extremely informative and especially interesting is how you see the fall in investment as not necessarily being linked to the “government’s restrictions on multiple home purchases.”

    The statement had me looking outside your discussion with Patrick to my own experiences when I was in China, which, while not unrelated to the data you are both providing, at least suggests that China’s hard fall will not be solely because of a “rapid deceleration of GDP growth.”

    When I visited my friend in Wuhan last year, we drove to the housing complex he lived in. The infrastructure in the complex was excellent and the house itself was almost on a par with accommodation here in Germany. However, the house is only one of 17 owned by my friend and when I asked him why half the houses in the complex weren’t lived in, he told me that the owners had other properties.

    Another point regarding “growth” is quite simply; it is difficult to measure. As you know, the provinces are in competition with one another and despite Beijing’s efforts – Wen Jiabao’s Government Work Report in March last year is one example of this – to balance the economy and move to a more sustainable model – might we say at the expense of unsustainable growth – this problem is still there. When I left Zhengzhou in July last year the factories all around Rai Da Lu were still spouting poison into the air. In my blog I make the point of where this will lead to;

    In short, my thesis is quite unusual and it is that even your 4.2% growth, might not necessarily lead to a particularly “hard landing” for China, but rather it will be Beijing’s inability to find a sustainable model for growth, in other words a model which addresses social inequalities and environmental issues, that will lead to the end of the not so “harmonious society.”. Moreover, with Bo Xilai out of the picture, the Autumn and the choosing of the standing committee will be particularly interesting, if only to get some inclination of China’s “quo vadis”.

  5. Bob permalink
    March 25, 2012 8:50 am

    @Alex, I’m not an expert on the matter, but as I understand it developers are trying to hold out as long as possible. Despite central government statements to the contrary, the developers still think that regulatory loosening is on the table and will happen sooner rather than later. And part of it may be that developers have no choice but to hope that regulations will loosen otherwise the market will crater. If, as a developer, your two options are to: 1) wait it out and hope that demand bounces back when regulations loosen; or 2) slash prices and record a loss immediately, then the choice becomes clear…I think. Again, this is just conjecture on my part.

  6. March 25, 2012 3:19 pm

    It astounds me, why the debate? Hard landing or soft landing? The former behooves the United States, the latter – not so much, nor is it really managable, for China’s economy is no where near true market economy.

  7. Hua Qiao permalink
    March 25, 2012 5:59 pm

    Regarding the issue Patrick raises about reported profits, I would echo that. I see questionable accounting all the time. The profits reported that Andrew cites are a fool’s paradise. Look at cash flow of these companies and you will find a much different picture. Search in these areas: capitalizing construction costs. Revenue recognition. Off balance sheet liabilities. Inventory. Fair Value accounting.

    China’s debt markets are driven by 2 things. Collateral and a faith that Grandpa will always support its National Champion children. Few of these companies can actually pay back the debt that they have taken on for fixed asset investment. It is a massive game of debt refinance. And that is the industrial sector, where overcapacity exists in just about every space: steel, aluminum, solar panels, ship building, chemicals etc. etc. And that’s the good part of the bank’s portfolios. Don’t ask about the Local Government Financing Platforms.

  8. princess1960 permalink
    March 26, 2012 2:41 am

    ok how i understand this convarsation between both mean there need help and /// the truth is now chine is one transitation time for the economy and untill chine go down (for sure) ..who have possibility for investiment is good to get money there so 2-5 year is the limit to get profit one invest what ever ells is ..this is not risk for everyone like to do because many business there get to much profit ..I dont think need big open something there..If you wanted to change all chines system politice Of COURSE YOU NEED BIG know are you in 0% income are you -% YOURS reputation is very higher so you have possibility to do something ..sometime one game make thinks look real..but not is not real and this time is diffrent with one very logic way..SO IS NOT” HARD LANDING”THANK YOU

  9. The Digit Man permalink
    March 26, 2012 8:11 am

    Dear Andrew, it’s human nature to think of the glass as half full, it’s so much more pleasant and rewarding and joyful to think of the ‘potential’ within China vis-a-vis the harsh reality of systemic flaws in its distribution of capital and non performing loans, perhaps you are of the belief that a rolling loan gathers no loss, it kept Wall Street going for a couple of years – but as we know its not possible to be delusional for ever and ever.

  10. March 26, 2012 9:49 am

    1. Paragraphs. Look into it.

    2. It seemed the difference between your two viewpoints was that you don’t have faith that the Chinese political class can address problems, and Andrew does.

    • prchovanec permalink*
      March 26, 2012 3:20 pm

      1. Andrew and I both broke our original submissions into paragraphs, which The Guardian removed in the published version.

      2. It goes deeper than that. I see the policies China’s leaders are pursuing (fueling investment growth through easy credit vs. rolling over bad debt while attempting to control for inflation) as presenting a far greater inherent conflict, which will come to a head far sooner, than any difficulties Andrew sees on the horizon.

  11. Shawn permalink
    March 26, 2012 11:20 am

    Great conversation that allows us to compare the bull and bear side of the story. The way I see it is that there are a couple of main threats to the Chinese economy:
    (1) bank NPLs (which will ultimately be absorbed by the government)
    (2) local government bad debt (which will have to be aided, if not fully absorbed by the government)
    (3) the property market on the edge of a cliff: this seems to be a tug-of-war between the prospective buyers and property developers to see who blinks first. If the buyers start coming in, then everything’s nice and rosy, and China achieves a soft landing. However, if the cash-strapped property developers start offering large discounts, then the bottom falls out of the property market, which results in a hard-landing.

    my question is:
    – What is there to prevent the government from going directly to the property developers and “ordering” them to follow a blueprint of gradually lowering prices instead of a large discount, to ensure that the supply and is gradually absorbed by demand at different tiers? There’s not much that the property developers can do anyways; if they don’t abide, their business is as well as finished (in my humble opinion).
    – it does seem plausible assuming the government has enough resources, and can’t more subversive tactics like this be used to engineer a soft-landing?

  12. Daniel permalink
    March 26, 2012 1:35 pm

    Thanks for the lively and robust debate!

    Some of the argument are quite weak:

    “If Chinese companies were really burdened with lots of investments that “are not paying back,” shouldn’t they be losing money?”

    They are, of course. Can accounting be dishonest in a highly controlled and mature capitalist environment? Go to Wall Street and check. Can accounting look like fairy tales in a country like China. Of course it can. We possibly should add : in the current framework it is currently inescapable!

    The China bull here is either employing the wrong argumentation or is delusional. I bet on the latest of course. These kind of bull argumentation is indeed what is creating havoc in the country. Does it mean that China will crash? I do not reckon so. Does it mean we are at an historical inflexion point? Yes we certainly are.

  13. Hua Qiao permalink
    March 26, 2012 2:40 pm

    I point to 2 Caixin articles as evidence of the delusional insanity/denial of reality.

    The first is an article on the Guangdong Pension fund.

    In this article, the National Social Security Fund (NSSF) has reported an annual average return in excess of 18% since 2003, more than 1000 basis points better than the industry average. Does anybody believe that? Forget about pension managers, what hedge fund manager wouldn’t kill for an 8 year track record of 18%?

    The second article is about China’s tollway companies, which have been the poster child for excesive debt.
    The Ministry of Transportation says that tollways are underleveraged because their debt to cap ratio is “only” 64%. He says it should be 80%, which is the maximum that banks will lend on project. No discussion of the toll road’s ability to repay such a huge loan. But this is the mindset of Cina’s officials. More debt regardless of whether it can be paid back.

  14. andao permalink
    March 26, 2012 3:40 pm

    Interested in hearing more about Andrew’s assertion that there is an urban housing shortage of 70 million units. This is interesting because it fits rather nicely with the alleged 65 million empty apartments being held as investments across the country.

    Also, what is the rate of construction on new residential properties? CIA Factbook says China is urbanizing at 2.3% per year. Meanwhile Sina News says housing stock increased 10 percent over 2 months at the start of 2012. ( So is it possible that housing construction is outpacing demand by more than 4x?

  15. March 27, 2012 10:59 pm

    Interesting how all these problems are coming in the heels of major political reshuffling in Beijing. Let’s see if chinese policymakers are really free from political paralysis.

  16. March 28, 2012 12:49 am

    Exactly, my point Andao!

  17. Shanghaier permalink
    March 28, 2012 7:58 am

    I would like to hear more on your opinions on what happened in the 90’s with the absorbing of bad debt. I see from the statistic that inflation was running high in those years, but we still saw a surviving and progressing China.

    Is there something different this time?

  18. FrParlentAuxFr permalink
    March 28, 2012 9:36 pm

    China encouraging the population to hold Gold and Silver is a magnificent policy tool to:
    1. Kick some dollars out of the balance sheet of the Chinese Central Bank and send them back to US shores. Since those are purchased from overseas, the Chinese deposits draw to import precious metals = kicking dollar outside since those PMs are bought with Dollars from outside.
    2. Sterilize money supply of China in “the tulip” (nowadays according to central planners and people with vested interest in fiat dollar, Gold = tulip, AAPL = currency (since the Swiss Central bank and the Israeli central banks are buying stocks to sterilize), and so on and so forth.
    3. Regardless, China slowdown or crash to 4% growth should enviable by any Western economies. China does not face wholesale dislocation of banking system like Europe, or massive erosion in currency like the US. So maybe the West should envy China to have such a “hard landing problem”. What are the policy tools available for the US should another recession happen there, (recession never happen in the future according to the Fed, only in the past, and after each recession, this one was the last one, the Fed promises). So could the Fed lower interest rates? Could the Treasury expand stimulus? We all know the answer to that.

    • March 29, 2012 12:50 am

      4% growth while enviable for the west is disasterous for China, it would not be enough to employ the millions coming into working age and migrating from the country sides.

      The chinese policy tools are quite limited as well, does anyone actually think they can afford another round of stimulus? They’ll probably be sorting through the misallocated loans from the last round of stimulus for some time to come. In fact the bad loans from the Asian financial crisis in the late 90’s are still on the books.

      At the current juncture it can be argued that China would be quite enviable of the american position. Low inflation, stable money supply, moderate growth (lead by manufacturing), falling unemployment. On the private side, here already has been several years of significant deleveraging in households, corporations and at the state level. Once the growth rate starts to display some staying power in the next year or so the federal government will have the impetus to start shutting off the horrendous defecit spending and tackle that issue.

  19. johnWax permalink
    March 29, 2012 3:46 pm

    I’ll take Hua Qiao and Daniel one step further to repeat a Pettis point. Andrew says “In the key industrial sector, corporate profit margins are now steady around 6%, the same level they have maintained for years. If Chinese companies were really burdened with lots of investments that “are not paying back,” shouldn’t they be losing money?”

    They ARE losing money. Nearly every study agrees that the total amount of direct, indirect and interest rates subsidies given to SOEs and large corporates exceed by several multiples their aggregate profitability in the past decade. These companies, in other words, are losing an amount of money equal to 5 or 6 times their stated profits but are able to show a profit because of subsidies or hidden transfers from the household sector. Of course they show profits, but these profits are worse than meaningless. Remove the subsidies and you would see exactly the evidence that Andrew implies would prove Patrick right.

  20. Y Kai permalink
    April 4, 2012 12:44 pm

    It’s very gracious for Mr. Batson–who is a real China expert–to even bother to debate a Libyan/Syrian/Russian/US politics/suddenly Chongqing/ expert-on-whatever-he-is-asked-by whomever/ blogger.

    Is there anything Mr. Chovanec that you will NOT comment on? Because you seem to present yourself as being available to comment on anything in the news.

    And where did you acquire your sudden expertise in Chinese political affairs, especially Bo Xilai? Are you hiding an MA or PhD is China Studies from us?

    • Alex permalink
      April 4, 2012 3:32 pm

      @Y Kai,

      You said plenty about Mr. Chovanec himself, but not much about his arguments. Do you believe that Mr. Chovanec’s arguments are wrong?

      Also, how do we distinguish ‘real China experts’? Should we distinguish them by them NOT commenting?

      And can you share with us what is the limit of subjects on which a person can comment before he ceases to be a ‘real China experts’?

      Is it a hard limit, like more than 3-4 countries on which you’ve commented render you not a ‘real China expert’?

  21. Y Kai permalink
    April 7, 2012 11:33 am

    Mr. Chovanec’s arguments are presented as if he is a Chinese expert. But he’s not. He’s a blogger, a commentator, and a summarizer, who happens to live in China and teaches English in a business school.

    Simply having a point of view does not make one an expert.

    Being willing to go on state-controlled media in China does not make one an expert.

    And it’s English language media in China, because Mr. Chovanec cannot speak Chinese and because that is the propaganda wing of the media, and they want people who are not really experts but willing to talk about anything. Look at Brandon Dwyer, who teaches English and is a stage performer and singer–he’s on all the time, too.

    Mr. Chovanec wants people to think that Chinese media is interviewing him for his insights. No, they’re interviewing him because he doesn’t have any, and is willing to talk about anything from Syria to North Korea to Sudan to whatever when asked.

    • prchovanec permalink*
      April 7, 2012 1:03 pm

      I can’t believe I’m wasting my breath on this, but …. for the record … anyone who wishes verification of my title and teaching status at Tsinghua need only contact me and ask, I am happy to show them the relevant documents. I say this simply in reply to Y Kai’s implication (here and elsewhere) that I am somehow misrepresenting myself.

      I have never claimed to be an “expert” in anything. I simply offer “an American perspective from China” about events and ideas I find intriguing. If someone finds what I have to say to be credible and interesting, great. If they want to interview me or write about it, fine. If not, that’s fine too.

      Y Kai is absolutely right in this sense: nobody should give a whit what I say based on any title or diploma I hold, or because somebody else quoted me in a newspaper. They should listen to a range of other people — some with far loftier titles than mine, others I respect who have no title at all — and decide for themselves whether what I have to say is worth thinking about.

      Y Kai, if you have something to say worth listening to, on any of these topics, I’m all ears.

    • Jack permalink
      April 8, 2012 8:54 am

      Dear Y Kai,
      I think it is quite fair for Patrick to write anything that concerns him under his personal blog entitled:” An American Perspective from China”
      By the way,your comment will be directly more relevent if he had called his blog:”China Economic Situation”,for example.
      Thank you.Enjoy your sunday.

  22. David permalink
    April 8, 2012 9:52 am

    Patrick, please try to ignore Y. Kai. He (or she) does not have any points at all. Long term stagnation is more likely what’s going to happen in China next.

    • prchovanec permalink*
      April 8, 2012 11:51 pm

      Y Kai is clearly confused, although I also sense a tinge of malice. I reply because he/she has been going around, not only on this site but others, making some very serious, anonymous, ill-informed accusations against me. Some might argue it’s beneath me to respond, but I also don’t want to create the wrong impression from my silence.

      Y Kai has been claiming that I am a hired instructor in English language at Tsinghua, that the title I use is my own invention and therefore a deception. This is nonsense. I do not teach English (I wouldn’t know where to begin). I teach MBA courses in international business strategy, business history, and comparative business models. Occasionally, I am incorrectly described as a “economics professor” or “finance professor” by some journalists, but that is not my doing. The correct description should be “business professor.” (I do, however, hold degrees in economics from Princeton, and finance and accounting from Wharton).

      Y Kai notes that I teach in English. What he either does not know, or fails to mention, is that Tsinghua’s entire International MBA program is taught in English, by both Chinese and foreign professors, in order to prepare Chinese students to excel in a global business environment and to accommodate visiting students from a wide variety of other countries. This is the same approach pioneered by INSEAD in Paris.

      Business schools, not just in China but around the world, are a bit different from programs in more scholarly academic fields. In addition to tenured professors who hold PhDs and spend their core careers in academia, MBA programs frequently bring on business practitioners to teach as professors in their field of experience (in my own case, this was my dual background in public policy in the US and private equity investment in China). The title these practitioners is given varies depending on the school and their level of expertise. In my case at Tsinghua, the title is “Associate Professor of Practice.” This is the title on my offer letter. This is the title on the Foreign Expert Certificate (an official government document) that Tsinghua sponsors for me to qualify for my residence permit. This is the title on the business cards the school has printed for me. So this is the title that I use — with the school’s public relations office’s explicit permission. As to what the school neglects, for any number of conceivable reasons, to put on its website, I have never bothered to check.

      As I said before, I don’t think titles prove anything. I don’t want to sound pompous by insisting on one. But I also don’t take kindly to being called a liar by someone who has no idea what they are talking about, and who hides behind fake names and bogus email addresses.

  23. Y Kai permalink
    April 8, 2012 11:16 am

    Then kindly make sure that the journalists who interview you know that your title is “someone who blogs from China”.

    If they say that you are a professor, ask them to correct that, because you do not hold a Ph.D.

    If they write that you are at Tsinghua, ask them to correct that, because your name does not appear as a professor there on any website they host.

  24. Andy Tolley permalink
    April 15, 2012 5:35 pm

    @Y Kai you really are a miserable soul and my only suggestion would be to get a life! You seem jealous and disturbed. You present no debate commentary yet criticize others personally. There is no claim by Patrick to him being a Ph. D. and most of the people I know who do not have Ph. D’s in life have succeeded. They are intelligent, worldly and have incredibly relevant informative and open commentary on the issues of the day – whether China or elsewhere. Perhaps the system you have grown up in has made you angry at others more successful than yourself. Maybe open your eyes and ears (I’m sure someone more versed in Chinese can explain it more eloquently for you in your native tongue) and take a leaf out of their books – list your viewpoints and make arguments that concern the topic being discussed.

    • David permalink
      April 16, 2012 5:38 am

      Y Kai actually over-simplifies things a bit. By challenging if someone has a PhD, has carries an implication: one with PhD is superior to one without. I have heard people asking, in the same analogy, “Is the Economics an exact science?”, which implies that an “exact science” is superior to one that is not. Both are typical cases of over-simplifying the multi-facet and overly complicated world we are in.


  1. Risks of a Chinese “hard landing” « Physician Investors
  2. China hard landing...2012/2013? | Pearltrees
  3. China's Risk Of Financial Instability - Forbes
  4. There’s A Huge Unreported Credit Guarantee Risk In China – Business Insider « mawillits
  5. Beijing Firm That Guarantees 3 Billion Yuan Worth Of Loans Is On The Verge Of Collapse | The Illuminati
  6. Beijing firm that guarantees 3 billion Yuan worth of loans is on the verge of … | Business Loans Guide

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: