Some economists viewed China's decision last week to allow the first default in it corporate bond market as a sign that the government is moving more toward free-market policies.

But Gary Shilling, president of A. Gary Shilling & Co., disagrees. He sees the default as a means for the government to exercise control. "Chinese leaders are control freaks," he told Yahoo.

The government can bail out any company if it chooses, Shilling noted.

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

Financial markets grew concerned after China reported over the weekend that its exports plunged 18 percent in February from a year earlier, compared with expectations of a 7 percent rise.

"Every January they tend to have negative exports because of the Lunar New Year, but this was more so than usual," he argued.

Shilling sees "some cause for concern [in this data], particularly because China is slowing," but he explained that's what should happen as China adjusts its economic model to one dominated by domestic consumption rather than exports.

The Chinese government has set a growth target of 7.5 percent. The question of whether the economy meets that objective or instead falls victim to a hard landing boils down to a matter of policy execution, Shilling said.

The government's 7.5 percent growth target may thwart the government's attempt to cut credit risks and reduce pollution, Bloomberg reported.

"It is going to be very challenging to achieve everything promised," Yao Wei, China economist at Societe Generale in Hong Kong, told the news service.

"Speeding up reform, fighting pollution, managing debt risk and yet the same growth target — something has to give."

Editor’s Note: 38 Trades That Could Turn $1,000 Into $49,000

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