China anxiety an unwarranted global malaise

Beijing has emphasized since last year that the real economy has entered a "new normal", a period of lower growth and deeper reforms. Meanwhile, it is still growing fast at an enviable rate. Problems do exist, but worrying about a probable crisis is certainly overdone.

In case of systemic risks, the Chinese government has enough policy tools to put the economy right. It has a large current account surplus and nearly $4 trillion of foreign-exchange reserves. Capital account restrictions and the state ownership of major banks add to the stability of its financial system.

In the short run, foreign investors can be assured of China's tactical macroeconomic management. On Tuesday, global markets saw a big upturn after the Chinese central bank announced cuts to both interest rates and reserve requirements at banks.

Of course, market sentiments can be very volatile and volatility has its toll. Only those investors who have grasped an objective picture of the Chinese economy can weather the turmoil and reap their gains. Market jitters will not last long and lead to global contagion. The optimists just need more time to prove they are right.