The population of China bears seems to keep growing. The already large colony of doomsayers can point to any number of legitimate troubles facing China, from slowing exports growth to an aging population, from real estate excesses to a moribund consumer sector. They use this long list to conclude that the Chinese economy could easily face a cyclical stall, what some term a “hard landing.” But there is a problem with their approach. Many of the issues to which the bears point will take years to have an effect. Other, more immediate problems are already dissipating. For all of China's very real difficulties, the country will likely experience a much softer landing than the bears fear.

Recent disappointing economic indicators have three roots, all cyclical in nature: (1) slow expansion in the United States and recession in Europe, (2) the legacy of China's past monetary restraint, and (3) a drop in residential real estate prices along with building activity. These are the key considerations for China over the next 12 to 18 months. Its very considerable demographic issues and need to increase the consumer's place in the economic mix, critical considerations though they are, will play out over a much longer time horizon and mean almost nothing for the outlook in 2012-2013.

Because exports are a primary engine of China's growth, it could not help but suffer from the subpar American recovery and outright recession in Europe. The European Union is China's largest export market, and the United States its second largest. So far this year, China's exports have grown at an annualized rate just barely above 9%, well down from the average expansion in the high-teens in 2010 and 2011. Actually, given what is happening in Europe and the U.S., the recent export performance shows remarkable resilience. Still, the slowdown has affected more general economic indicators, such as industrial production, electricity generation and new purchase orders from Chinese industry.