An interesting piece that tries to answer the question: “Why does everybody in the West think that China’s economy is doing very badly when it demonstrably isn’t?” from a very capitalist Hong Kong research group thinktanky place:

At an investment conference in Kuala Lumpur recently, I caught up with an old friend and Gavekal client. Over coffee between sessions, we talked about one of the most visible changes of the last few years in Asia: the Chinese cars that have so quickly appeared on roads across the continent. This led us to the comments made in September by Ford chief executive officer Jim Farley. Freshly returned from a visit to China, Farley told The Wall Street Journal that the growth of the Chinese auto sector poses an existential threat to his company, and that “executing to a Chinese standard is now going to be the most important priority.” By any measure, this is an earth-shattering statement.

Making cars is complicated. Not as complicated as making airliners or nuclear power plants. But making cars is still the hallmark of an advanced industrial economy. So, the idea that China is suddenly setting the standards that others must now strive to meet is a sea-change compared with the world we lived in just five years ago.

This led my friend to question how Farley and other auto industry CEOs could have fallen quite so deeply asleep at the wheel. How could China so rapidly leapfrog established industries around the world without all those very well paid Western CEOs realizing what was happening until two minutes ago?

The rest of the piece continues in that more informal style, so I’ll just summarize the rest of the article:

During the pandemic, and especially as the Ukraine War was causing chaos, nobody from the West really bothered to visit China, and so haven’t seen how things have developed. This is in line with a Dengist strategy of keeping a low profile and not flaunting their capabilities, but it wasn’t as if China was stopping them from visiting - CEOs just had other things to worry about with supply chain disruptions.

The author then basically says that China is doing capitalism better than the West, and now the West is (rather hilariously) backing away from jerking off the very concept of globalization and now think tariffs are awesome again.

Next, he talks about how the West has been pretty consistently racist against Asia throughout history, and these racist impulses still very much exist, so they would naturally underestimate China. There’s also the fact that China is a communist state, and everybody in the West is brought up on anti-Soviet propaganda (the author doesn’t use that word, unfortunately).

He moves on to explaining how the West is assuming that China = Japan 30 years ago, with inaccurate similarities drawn between their economic situations. The West is saying to itself that China will need to do massive fiscal stimulus to keep growing and get out of its “rut”, but they don’t seem to be considering if this rut is actually intentional, in order to bring down Chinese real estate and focus on more productive endeavors. This graph says it all:

There’s no real conception that the collapse in real estate might actually be the policy and not the catastrophic consequence of like, communists not understanding Economics 101. The government explicitly said that this was the goal the entire time. Additionally, the property bust has hit the biggest cities the hardest, especially among millennials, but third and fourth tier cities are doing fairly well (the rural situation is complicated but dissatisfaction is concentrated in older people there). As the first and second tier cities are the most often visited by Westerners, their image of China is disproportionally negative. Meanwhile, in the third and fourth tier cities, there has been an industrial and transportation boom, which has gone almost unreported in the West.

Some more explanations for Western negativity include a general tendency to report bad news more than good news (“China is FIVE DAYS from TOTAL COLLAPSE!” gets more clicks than “Things are doing pretty good in China.”) as well as China’s lackluster stock market performance relative to its massive improvements, and Americans hyperfocus on stocks.

And, of course, the final contributing factor: that the US is pumping hundreds of millions of dollars to "…raise awareness of and increase transparency regarding the negative impact of activities related to the Belt and Road Initiative, associated initiatives, other economic initiatives with strategic or political purposes, and coercive economic practices.” via the Countering the PRC Malign Influence Fund Authorization Act.