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July 2003
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| MAGNIFYING GLASS |
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China Bright Spot in Global Economic Gloom
China is a bright spot in a picture of overall global economic gloom, with
Europe and Japan in trouble and the US upturn threatening not to materialize,
Stephen Roach, chief economist for Morgan Stanley, said in Beijing.
Roach said China is the one place in the world showing vigorous growth, a view
fleshed out by figures which show that the country accounted for 17.5 percent of
global GDP growth in 2002, second only to the US.
He said Morgan Stanley had upgraded China's GDP growth forecast to 7.5 percent
from 6.5 percent during SARS and 7.0 percent at the beginning of the year, due
to the "dramatic export growth coming out of China".
"We underestimated the truly spectacular growth in exports and industrial
activity during the second quarter," he said. "No country in history has
experienced a growth in exports quite like this."
Roach said China had "demonstrated resilience in its underlying economy" and
over the past few years had dealt successfully first with external crises,
notably the Asian economic crisis of 1997 and the global slowdown of 2001, and
subsequently with the internal crisis caused by SARS.
He said China's response to the Severe Acute Respiratory Syndrome outbreak --
following its initial uncertainty -- "said more about the country than he
originally thought".
Roach said China's leadership had admitted that it was wrong, and that higher
levels of transparency and accountability had been established, with China
beginning to act more like a global leader.
"China has come of age while the rest of the world has aged" he told the press
conference.
But he highlighted weaknesses in the Chinese economy, notably its enduring
dependence on foreign direct investment, state investment and external demand.
"The Chinese consumer needs to come to life, though this is still several years
off. When this happens, China will become a genuine source of international
growth."
Roach also said China's currency policy was fine as it was, despite pressure on
the country from around the world to re-evaluate the yuan. He said the world is
focusing on the yuan as a point of tension, and that China would address this
issue before long.
Roach added that China was "closer to opening its capital account, but was
unlikely to run the risk of accelerating the pace of opening-up."
"Capital reform has to be driven by [China's] ability to sustain investor
confidence," he said.
The chief economist said it was "not surprising that there were rumors about a
currency re-evaluation considering the state of the world economy", but that it
should be left to the Chinese government to decide if the current peg is
appropriate.
Roach added that China was "closer to opening its capital account, but was
unlikely to run the risk of accelerating the pace of opening-up.
"China is committed to opening up its capital account and making its currency
convertible... but capital reform has to be driven by [China's] ability to
sustain investor confidence," he said.
Source: chinadaily.com.cn
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