Why China's challenges are not a catalyst for disaster

Since the late summer of 2010, the MSCI China index has barely risen at all. However, such apparent placidity obscures how rough a ride the market has taken investors on writes Douglas Turnbull, manager of the Neptune China fund.

There have been 17 distinct moves between interim peaks and troughs; they have averaged 21% in magnitude, and around four months in duration. This is an accurate portrayal of sentiment towards China, lurching from extrapolation into the short-term of longer-term systemic challenges, through relief that the impending collapse has passed by, to relative optimism - and back again. Certainly China does face challenges. Growth is slowing, debt is accumulating, reform of inefficient sectors and companies with excess capacity is needed and the financial system ought to be stressed. Howeve...