Joe Zhang is co-chairman of SBI China Capital.

One day in 1986, I went to a bank branch in the Sanlihe area of Beijing to withdraw money to buy a typewriter.

At the time, I was an officer at the People's Bank of China, China's central bank, and was preparing to study in Australia. Unfortunately, the bank manager told me they had run out of money. So, I left, grumbling, only to return the next day to get my cash out of the bank.

Remarkably, that experience of mine is still nothing out of the ordinary in China. And when it happens, depositors wait instead of panicking, because they trust that their money is safe.

To the regular Joe, dealing with any street-corner bank branch is akin to dealing with the state. Since 1987, many banks and other deposit-taking institutions in China have gone bust, but the government has always arranged for a bigger bank to take over that bank's liabilities.

Bad economic news comes out of China every now and then. Sometimes it is so scary that it seems to cause a major upheaval. However, everything still turns out fine in the end. This points to a consideration as to why China may continue to be a stabilizing factor in the world economy in the years ahead.

Broadly speaking, there are four reasons. First, the state still accounts for some two-thirds of China's economy. Given the mixed ownership of many businesses, there is some legitimate disagreement as to the exact percentage of state ownership. However, there is no debate on who calls the shots in major sectors such as telecoms, railways, ports, airports, oil and gas, construction, banking and finance.

When state ownership is dominant, and regulations are overbearing, price signals in the marketplace do not travel quickly. Obviously, there are efficiency losses in this structural configuration. But the silver lining is that the economy tends to be more stable and less volatile than elsewhere.

Secondly, there are in-built circuit breakers in China to minimize any contagion effect. For example, the state regularly controls product prices and rations quantities in the name of social harmony. Foreign exchange control is one example, while property price control is another. Interest rates are capped. And caps on the prices of electricity, gas, freight rates, transport tariffs and medical care are commonplace too.

Contagion effects are often amplified by financial derivatives. Remember how GE Capital, AIG and Lehman Brothers got into trouble in 2007-08? Without financial derivatives, they would not have caused a global panic.

But in China, most financial derivatives have not taken hold or have been banned by regulators. For example, banks and corporates are discouraged from using futures, forward contracts and credit default swaps. In the case of credit default swaps, there is hardly any trading in the secondary market.

Amid a general stock-market meltdown in 2015 and again in 2017-18, over one-third of share trading in public companies was suspended at one stage.   © Reuters

And the government and judicial system routinely frustrate the enforcement of derivatives contracts. Amid a general stock-market meltdown in 2015 and again in 2017-18, for example, more than 1,000 -- over one-third of the total -- public companies' stock trading was suspended at one stage, and creditors were prevented from enforcing contracts.

The result of official meddling means that China's legal system will remain weak and backward. But the silver lining is stability. The government often manages crises by decree. Given the government's very high approval rating, it often gets away with arbitrary interventions. For example, for decades the government has randomly decided who is allowed to bid for state land and buy property, and at what prices.

Finally, China's economy is very liquid: There is a huge trade surplus month after month. The fiscal deficit is also manageable as a percentage of GDP. Moreover, the state owns vast numbers of operating assets in the form of utilities, infrastructure and banks. And they generate enormous cash flows for the state every day.

Since China embarked on its open-door policy in 1978, it must have suffered several recessions, judging from electricity consumption and transport volumes. But the official statistics have been manipulated to fool us. And inherent shock absorbers also fool us into believing that the economy has been smooth and growing in a straight line.

For example, when exports fall, imported raw materials also fall, reducing foreign exchange outlays. Another example is when redundant factory workers automatically go back to their rural roots (like many of my fellow villagers), and thus immediately reduce the unemployment rate in cities.

China's bank depositors may always stay cool even when their banks are fighting for survival, as seen in the past few years when Baoshang Bank was collapsing. But this is a recipe for malinvestment and efficiency losses. Corporate executives have few incentives to be vigilant and diligent.

Meanwhile, the regular Joe indulges in reckless investments with eyes wide open, knowing full well that the state will eventually bail him out. Evergrande and numerous other corporates have taken full advantage of retail investors' blind faith.

This system must change if China is to make its economy more competitive and efficient. The state may not always be our savior, nor should it be, if our economy is to succeed on its own terms.