“JUST the other day we were afraid of the Chinese,” Paul Krugman recently wrote in the New York Times. “Now we’re afraid for them.” He is among a number of prominent commentators contemplating calamity in the world’s second-biggest economy. Three measures seem to encapsulate their fears. Economic growth has slowed to 7.5%, from its earlier double-digit pace. The investment rate remains unsustainably high, at over 48% of GDP. Meanwhile, the debt ratio—ie, what China’s firms, households and government owe—has risen alarmingly, to 200% of GDP, by some estimates.
Concerns about the first number were assuaged a little this month, when China reported strong figures for trade and industrial production (which rose by 9.7% in the year to July; see chart). Yet beneath the cyclical ups and downs, China has undoubtedly seen its momentum slowing.