China’s stock market has experienced significant volatility so far this year. Michael Pettis, an economist and professor at Peking University’s Guanghua School of Management, shares his perspectives on the country’s evolving economic landscape.
On the potential effect of China’s market volatility: “The direct impact of volatility in the stock market on the economy is really minimal. The real worry is the extent to which it erodes government credibility – it’s very tied to stock market performance.”
On what is next for China’s economy: “There are two things I will be watching very closely. Firstly, the GDP growth targeting – if [the Chinese government] continues to keep growth levels at 7% or if they talk about much lower numbers. I will also be watching for steps towards privatization, which is probably the easiest way economically to guarantee a successful adjustment, but politically very tough.”