Opinion | China needs a sense of crisis to reform its unbalanced economy

Global opinion on China's economic prospects appears to have soured of late. Credit ratings agency Fitch downgraded the country's long-term local-currency rating from AA-minus to A-plus last month, followed by Moody's lowering of the country's credit outlook from "positive" to "stable". Meanwhile, JPMorgan Chase has advised cutting Chinese stock holdings and, last week, a prominent article in The Wall Street Journal argued that China was due for a "1997-style crisis".

This concert of bearish sentiment is a first in recent years. Why has it emerged now, in the wake of the global financial crisis, when the supercharged Chinese economy is being seen as a lifeline keeping the global economy afloat? Not surprisingly, the question has stirred debate among political and business circles at home, and some official media have reacted strongly.

The China bears based their analysis on this: China's economy is slowing, and massive local government debts could burden the national balance sheet, impeding the economy's balanced and stable growth. They see risks to China's financial system. On closer inspection, however, the analyses aren't all pessimistic. Though caution predominates, their warnings of trouble are less dire than at first thought. There is no need to overreact.

In fact, the considered views within China are even more negative. For example, JPMorgan's downgrade of Chinese A-shares from neutral to underweight will surprise no one at home. The stock market's sluggish performance in the past few years exactly reflected investors' low confidence. Moreover, worries about high local government debt and the ills of excessive capacity are commonly voiced at home, while the risks of a financial meltdown have never been far from policymakers' minds.

China should take the opinions of others in its stride, as a reminder for us to be more vigilant against potential dangers. Being overly sensitive to criticism is immature.

True, over the years there has been no shortage of subjective, over-the-top predictions of China's demise. In 1994, American scholar Lester Brown asked: "who will feed China?" In 2001, Gordon Chang predicted "the collapse of China" in five years. Facts have proven their hypotheses wrong.

These predictions of gloom should not worry China. Rather, it should concern itself with how to resolve the problems of its increasingly complex economy. It must not bury its head in the sand, for the longer it delays action, the more intractable the problems become. In this, China will be no exception: crisis will strike when the contradictions reach a breaking point. Reform is in a race to avert crisis.