American economist Stephen Roach has countered the rising tide of bearish opinion on China with a robust defence of the Middle Kingdom’s economic prospects.
The chairman of Morgan Stanley Asia dismissed recent sceptics on China as merely the latest round of “China doubters”. They seem “to come in waves – every few years, or so”, he said.
He acknowledges that concerns about inflation, excess investment, soaring wages, and bad bank loans contain “a kernel of truth”, but remains confident that China will continue to perform “the most spectacular miracle of modern times”.
One of China’s key strengths, says Roach, is that it’s a “good learner from past crises and shifts course when necessary”. Its successes have been down to 30 years of reform and it now looks likely to embark on another major shift – from manufacturing exporter to a “flourishing consumer society”.
Moreover, this shift to consumption and services will create “a labour-intensive, resource-efficient, environmentally-friendly growth recipe – precisely what China needs in the next stage of its development”.
Indeed, China has already laid the groundwork for a move away from basic manufacturing by investing in education and innovation. Shanghai’s 15-year-old students are now top-ranked globally in mathematics and reading. R&D spending is also on the up while foreign firms are providing access to international technology. The recent rise in patent applications shows that the “country is well on its way to a knowledge-based economy”.
But perhaps the most important factor in China’s favour is that it is able to follow a strategy. Unlike the West, “which is trapped in a dysfunctional political quagmire, China has both the commitment and wherewithal” to change. Don’t listen to the “naysayers”. This “is not the time to bet against China”.