Seek truth from facts, as Chairman Mao once advised. In that spirit, I urge: don't believe the myths about China's economy. China is neither a threat to the world, an island of stability in Asia nor an example for anyone else to follow. It is big but still mostly self-contained. It is troubled but not in deep crisis. Unfortunately there are glib views out there about China that are not only misconceived but dangerous.

Myth 1: China's economy is still growing rapidly and will help pull Asia out of its crisis.

Chinese Premier Zhu Rongji is sticking to his promise of 8% GDP growth this year. And many independent forecasters still expect growth to exceed 7%, an impressive level given China's size, its devastating floods and the woeful state of its neighbors' economies. The growth estimate is mere political rhetoric.

At the other extreme are the China bears, who focus instead on the available data for inflation (falling), power consumption (rising at a feeble rate) and imports (static). Toss in losses from the flooding, and these analysts conclude that growth must in fact be near zero.

No one really knows the truth because much of the data is unreliable. China's official growth figures, for example, are wildly inflated because they overestimate the input of small and medium-sized enterprises. But let's split the difference between propaganda and extreme skepticism and say China's growth this year will be 4%. That's low, and not nearly enough to get a grip on unemployment. And it's bad for Zhu's image as a can-do leader: for his sake, it's a political imperative that the economy perform better next year. On the other hand, 4% would not be a disaster for China, Asia or the rest of the world. China is not an engine for Asia's growth, and 4% is far better than rates elsewhere in the region.

Myth 2: Zhu's state-enterprise and banking reforms will bring about a new surge of growth.

The reality is that his attempts at reform have so far only contributed to China's slowdown. Urged by Zhu to take a more commercial attitude to loans and face the consequences of bad ones, banks have tightened lending policy. That means less money for real investment, as most new credits have gone to finance losses or fund the accumulation of unsold inventories. Reforms at state-owned enterprises (SOES) have increased unemployment, prompting nervous workers to spend less and save more. Consumer demand is low, production capacity excessive, yet SOES keep churning out unsaleable goods.

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