The Unbalanced Economic Relationship of the United States and China
Yales University Press
Jan 21, 2014
Yale University Press: Who has the upper hand in the codependency of America and China?
Stephen Roach: As is the case in human relationships, codependency
for economies is not sustainable. It can lead to imbalances, a loss of
identity, and a broad array of tensions and frictions. As I argue
in Unbalanced, there are
visible manifestations of all of these characteristics now at work in both
America and China. It’s hard to say who has the upper hand in this
relationship.
·
The United
States, with its dominant military power and the world’s largest economy,
certainly has a commanding position today. But
·
a rising
China, with a huge reservoir of domestic saving – some 51 percent of its GDP in
2013, or fully three times the 17 percent national saving rate in the U.S. –
certainly has the wherewithal to go its own way in the years ahead and break
the shackles of its dependence on the United States if it choses to do
so.
Saving-short
America, still heavily dependent on surplus saving from abroad, has far less
latitude in that key regard.
YUP: How has the U.S. and China’s unbalanced relationship created a false
sense of prosperity?
SR: Beginning in the late 1990s, the income-strained U.S.
economy drew increasing support from the so-called wealth effects of surging
asset markets – first from equities, then from residential property and finally
from cheap credit. The problem was that each of these asset-dependent
underpinnings ended in bubbles – bubbles that ultimately drew support from
Chinese purchases of dollar-denominated assets. Washington, Wall Street,
and Main Street collectively deluded themselves into thinking this
asset-dependent growth was a new recipe for economic prosperity. When the
bubbles popped, however, it quickly became apparent that this was a dangerous
false prosperity. To the extent that export-led growth in China was dependent
on America’s asset and credit bubbles, it, too, went down a path of false
prosperity. When the export underpinnings of China’s external demand
collapsed in late 2008 in the depths of the Great Crisis, this, in fact, became
painfully evident.
Seite
62 - Globalisierung zähmen
Franz-Bernhard
Nolte
Bremen in
2007
„Eine Politik des „billigen Geldes“ und des kreditfinanzierten Konsums war eine der wenigen Optionen, die der US-Regierung zur Verfügung stand, um eine drohende längerfristige Rezession nach dem Platzen der Internetblase, nach dem Absturz der Technologieaktien und nach dem 11. September 2001 abzufangen.
Nur so ist es gelungen, die amerikanische „Wachstumslokomotive“ der Weltwirtschaft, die vom Konsum getrieben wird, am Laufen zu halten und eine Abschwächung der US- und Weltkonjunktur zu verhindern. Mit Schulden finanziertes Wachstum war der amerikanische Weg aus der Krise.
Während die einen immer mehr Schulden machen, ihr Leistungsbilanzdefizit vergrößern und das Leben hier und jetzt genießen, sparen die anderen für zukünftigen Konsum und legen sogar noch Reserven an für der Fall, dass das derzeitige, globale Wirtschaftsregime einer „Arbeitsteilung“ mit chinesischer Produktion und amerikanischem Konsum plötzlich ins Stocken gerät.
Diese Art von
„Arbeitsteilung“ funktioniert bisher sehr gut und hat zu jahrelangem Wachstum
der Weltwirtschaft geführt mit Kapital- und Technologietransfer von den reichen
zu den armen Ländern und Waren- und Gütertransfer für den Konsum von den armen
in die reichen Länder. Beide Seiten profitieren von dem Geschäft. Die eine
Seite kann zur Zeit ohne die andere nicht existieren.
Gleichzeitig aber ist das globale Wachstum dabei völlig aus dem Gleichgewicht gekommen und es haben sich so genannte „globale Ungleichgewichte“ gebildet.
In dem Maße, wie sich die amerikanische Industriegesellschaft in eine Dienstleistungsgesellschaft gewandelt hat und die Industrie ihre Produktion und zunehmend auch Forschung und Entwicklung in „Niedriglohnländer“ wie China verlagert hat, um dort für sich produzieren zu lassen, hat sich eine Spirale gebildet, die derzeit – so scheint es jedenfalls - nicht aufzuhalten ist und sich unaufhaltsam nach oben schraubt. Mit den Defiziten der einen Seite der Medaille wachsen die Guthaben der anderen.“
Gleichzeitig aber ist das globale Wachstum dabei völlig aus dem Gleichgewicht gekommen und es haben sich so genannte „globale Ungleichgewichte“ gebildet.
In dem Maße, wie sich die amerikanische Industriegesellschaft in eine Dienstleistungsgesellschaft gewandelt hat und die Industrie ihre Produktion und zunehmend auch Forschung und Entwicklung in „Niedriglohnländer“ wie China verlagert hat, um dort für sich produzieren zu lassen, hat sich eine Spirale gebildet, die derzeit – so scheint es jedenfalls - nicht aufzuhalten ist und sich unaufhaltsam nach oben schraubt. Mit den Defiziten der einen Seite der Medaille wachsen die Guthaben der anderen.“
YUP: Why does the U.S. economy depend on China and how can we regain our
independence?
SR: U.S. economic growth has long been led by American
consumers. In 2013, personal consumption expenditures accounted for fully
69 percent of U.S. gross domestic
product (GDP) – a record for any nation in modern history. Paradoxically,
this consumer-led growth has occurred in a period of unusually sluggish real
income growth for most American families. That’s where China enters the
equation – as a source of cheap goods that enables a hard-pressed middle class
to buy more with their limited incomes. China has also become a huge source of
demand for U.S. government securities; it is now America’s largest foreign
lender, currently owning approximately $2 trillion of such assets. That
partially fills the void of a shortfall in U.S. domestic saving and helps
prevent U.S. interest rates from rising – thereby providing further support to
American economic growth. Regaining our economic independence is simple on
paper – boosting our saving capacity and revitalizing the competiveness of our
workers and manufacturing industries – but much tougher in practice.
Bremen in
·
die USA ihre
Ausgaben vermindern und ihre Sparquote
erhöhen müsse, will heißen, dass sie ihren Lebensstandard ganz allgemein absenken müssen, um das aus dem
Gleichgewicht geratene Weltwirtschaftssystem von ihrer Seite her zu stützen.
·
Auf der anderen Seite werden vor allem die
Schwellenländer Ostasiens aufgefordert, ihren Teil zur Reduzierung der globalen
Ungleichgewichte beizutragen, indem sie weniger
für den Export, dafür mehr für den
eigenen Binnenmarkt produzieren und ihre hohen Sparquoten senken, um die Binnennachfrage entsprechend anzuregen.
Der Beitrag der Schwellen- und Entwicklungsländer und hier besonders von China zur Korrektur der globalen Ungleichgewichte scheint eine nachhaltige Entwicklung ihrer Volkswirtschaften zu sein. Nötig ist die
·
Umleitung des Exports in den Binnenmarkt,
·
die Anhebung
der Kaufkraft der heimischen Verbraucher,
·
der Auf-
und Ausbau eines sozialen Netzes und der Altersvorsorge, um so die
·
zu hohe Sparquote zu senken. Das würde eine Anhebung
des Lebensstandards besonders der ärmeren Schichten in diesen Länder bedeuten
und somit eine allgemeine globale Steigerung des Wohlstands der Menschen.
Sollte das die Richtung sein, in die die Weltwirtschaft
und die weltweite Arbeitsteilung durch die von der Globalisierung
hervorgebrachten Widersprüche getrieben wird, dann hätte die Globalisierung „Früchte“ getragen, die es jetzt zu
„ernten“ gilt.
Auf Seiten der reichen Industrieländer und der Vereinigten Staaten scheint die Entwicklung in eine andere Richtung zu treiben, wenngleich die enorme Dynamik und Anpassungsfähigkeit der USA nicht unterschätzt werden darf.
Insbesondere auf Seiten der USA wird als unverzichtbarer Beitrag zur Reduzierung der globalen Ungleichgewichte der Abbau eines „übertriebenen Konsums“ angeführt. Stattdessen soll die bei null stagnierende US-Sparquote gehoben werden, damit die aufgehäuften Schulden der privaten Haushalte von 11 Billionen US$ und die des Staates von über 4 Billionen US$ zurückgezahlt werden können.
YUP: How has China been able to challenge the U.S.’s global economic leadership?
SR: Thirty
years of 10 percent economic growth has now pushed China past Japan as the
second largest economy in the world. It is only a question of when, not
if, China will surpass the United States as number one. In Unbalanced, I lay out a scenario that
such convergence should come by 2027; there is a distinct possibility that it
might occur even sooner than that. With China having more than four times the population of the United States,
these trends are hardly a surprise. The real measure of prosperity,
however, adjusts for population disparities and finds China’s per capita income of $6,600 in 2013, far short of the $51,200
level in the United States. Under heroic assumptions for sustainable
rapid growth and development in China, convergence on a per capita basis is
still many decades away. As that point draws near, only then can we begin
to speak of a Chinese challenge to American economic hegemony.
YUP: Which superpower will rebalance their economy first, the U.S. or China?
SR: By all indications,
it will be China. Seven years ago, China’s former premier, Wen Jiabao,
sparked the rebalancing debate by his famous critique of the “Four Uns” – a
Chinese economy that he depicted as “unstable, unbalanced, uncoordinated, and
(ultimately) unstable.” This led to the enactment of the 12th Five-Year Plan in March 2011, which laid out
the broad framework of a consumer-led rebalancing of the Chinese economy.
In retrospect, that plan was more a rhetorical commitment to rebalancing than a
detailed blueprint for change. It was lacking an implementation
mechanism. This has been subsequently addressed in the recently concluded
Third Plenum of the Central Committee of the Chinese Communist Party that was
held in November 2013, which contained 60 specific reform initiatives and the
establishment of a new “leading committee,” headed up by President Xi Jinping,
to focus on implementation.
·
In light of
these developments, it is now safe to say that China is firmly on the path of a
fundamental economic rebalancing.
·
The United
States, by contrast, seems intent on resurrecting the timeworn model of
consumer-led growth – relying on quantitative easing by the Federal Reserve to
boost consumer demand through the wealth effects arising from surging asset
markets and seemingly unwilling, or unable, to boost its long-term saving
potential as a source of future economic growth…
Bremen in 2007
Ein Weg zur
Reduzierung der globalen Ungleichgewichte
·
„Wir werden die Binnennachfrage in
den nächsten fünf Jahren erheblich stärken, um neue Wachstumsimpulse zu setzen“, sagte der chinesische Vizepremier Zeng. Die Wachstumskräfte
sollen vermehrt aus der Binnennachfrage kommen und der Befriedigung der unmittelbaren Bedürfnisse der eigenen Bevölkerung
dienen.
·
Das wirtschaftliche Wachstum soll nicht
mehr so sehr vom Export abhängig sein, der von der weltweiten Nachfrage,
insbesondere in den USA, getrieben wird. „Gleichzeitig müssen wir ein
Gleichgewicht zwischen Konsum und Investitionen erzeugen.“ sagte Zeng weiter.
·
Investitionen sollen sich zunehmend am Konsum
aller Schichten der chinesischen Bevölkerung orientieren und nicht mehr so sehr
an der Befriedigung der Bedürfnisse der amerikanischen Verbraucher. Das
Potential scheint vorhanden.
·
Der Markt ist riesig. Jeder fünfte
Mensch lebt in China. Jeder dritte Mensch in Indien und China. Die Wirtschaftspolitik dieser beiden
Länder betrifft unmittelbar ein Drittel der Verbraucher und Märkte.
·
Während die chinesische „Wachstumslokomotive“ vor allem auf der Produktion von Waren und realen Gütern
beruht und den Reichtum des Landes vermehrt,
·
vergrößert das amerikanische konsumgetriebene Wachstum immer mehr das Loch
in den Taschen der privaten US-Haushalte und der US-Regierung. Die Konsumentenschulden, das Haushaltsdefizit
und das Leistungsdefizit werden dadurch in den USA immer größer, während
·
in China die Währungsreserven und
die Guthaben von US-Staatsanleihen jetzt auf über 900 Mrd. Dollar
angestiegen sind.
·
Während in den USA die Sparquote bei
Null angelangt ist, liegt sie in China
derzeit bei 45 Prozent.
Die Guthaben der Chinesen in Form von
Währungsreserven oder US-Staatsanleihen können eingesetzt werden, um
·
die eigenen Binnenmärkte
zu entwickeln,
·
die Infrastruktur im Lande aufzubauen und
ein soziales Netzt zu spannen.
Die Aufgabe, für über zwei Milliarden Menschen ein angemessenes Bildungs- und
Gesundheitswesen zu entwickeln und so die Kaufkraft zu heben, wird eine große
Herausforderung und ein großer Sprung nach vorne sein und viel Zeit erfordern…“
YUP: Going forward, what does the U.S. need in order to prosper in this
relationship?
SR: First and foremost, the U.S. body politic needs to
take a long and hard look in the mirror and accept responsibility for America’s
homegrown economic problems such as inadequate saving, bubble-prone monetary
and regulatory policies, and a loss of competitiveness. In doing so, it
must stop pinning the blame on others, especially China. Yes, America has
a large bilateral trade deficit with China that many believe is putting
pressure on jobs and real wages of American workers. China’s alleged currency manipulation only
compounds its blame, goes this view. But the so-called China problem is
only part of a much broader multilateral problem as underscored by U.S. trade
deficits with 102 nations in 2012. The cause of this multilateral
imbalance again goes back to America’s chronic saving shortfall and the need
for the U.S. to run a large current-account and multilateral trade deficit in
order to attract the foreign capital that it needs to fill its saving void. As
I stress in Unbalanced,
there is no bilateral fix for America’s multilateral problem. In other
words, China bashing is not the answer to that which ails American
workers. At the same time, Washington’s trade negotiators have every
reason to demand fair and equal treatment from China under international trade
conventions – especially on grounds of market access in light of the limited
penetration of China’s domestic markets by U.S. manufacturers and services
providers. As China shifts to more of a consumer led model, the market
access issue will become increasingly critical for China’s major trading
partners, such as the United States. China is America’s third largest and most
rapidly growing export market. Shame on us if we squander the opportunity
to convert Chinese rebalancing into a new source of growth for a growth-starved
U.S. economy.
Stephen
Roach is senior fellow,
Jackson Institute for Global Affairs and School of Management, Yale University.
Prior to that he was Chairman of Morgan Stanley Asia, and for the bulk of his
career on Wall Street was Chief Economist of Morgan Stanley… Roach has
written extensively for the international media and appears regularly on
television around the world.
is
available now from booksellers.
The Chinese and U.S. economies have been locked in
an uncomfortable embrace since the late 1970s. Although the relationship
initially arose out of mutual benefits, in recent years it has taken on the
trappings of an unstable codependence, with the two largest economies in the
world losing their sense of self, increasing the risk of their turning on one
another in a destructive fashion.
The Codependency of America and ChinaStephen Roach, senior fellow at Yale University and former chairman of Morgan Stanley Asia, lays bare the pitfalls of the current China-U.S. economic relationship. He highlights the conflicts at the center of current tensions, including disputes over trade policies and intellectual property rights, sharp contrasts in leadership styles, the role of the Internet, the recent dispute over cyberhacking, and more…
The Codependency of America and ChinaStephen Roach, senior fellow at Yale University and former chairman of Morgan Stanley Asia, lays bare the pitfalls of the current China-U.S. economic relationship. He highlights the conflicts at the center of current tensions, including disputes over trade policies and intellectual property rights, sharp contrasts in leadership styles, the role of the Internet, the recent dispute over cyberhacking, and more…
Here
he discusses:
Why America
saving too little and China saving too much creates
mounting problems for both.
How China
is planning to re-boot its economic growth model by moving from an external
export-led model to one of internal consumerism with a new focus on service
industries.
How
America, shows a disturbing lack of strategy, preferring a short-term reactive approach
over a more coherent Chinese-style planning framework.
The way out: what America could do to turn its own economic
fate around and position itself for a healthy economic and political
relationship with China.
In the wake of the 2008 crisis, both unbalanced
economies face urgent and mutually beneficial rebalancings. Unbalanced concludes with a recipe for resolving the escalating
tensions of codependence. Roach argues that the Next China offers much for the
Next America—and vice versa.
Bremen
in 2007
·
“Während die Finanzgeschäfte von Investmentbanking , Versicherungen, Finanz
investoren,"hedge-fonds" und
von "private-equity" blühen und die globalen Konzerne
glänzende Gewinne machen, sind die Bürger in den reichen Industrieländern die
Geschädigten, die Immobilien-Schulden anhäufen, Kaufkraft, Kreditwürdigkeit,
soziale Sicherheit und Arbeitsplätze verlieren…
·
Die Menschen in den Schwellen- und Entwicklungsländer
dagegen gewinnen Millionen Arbeitsplätze, zunehmende Kaufkraft, soziale
Sicherheit, technologisches Wissen und häufen immer mehr Reichtum und
Währungsreserven an im Zuge einer globalen "new economy" , die sich am Wachstum der
Volkswirtschaften orientiert und nicht zuallererst am Profit des Einzelnen…
Eine globale "new
economy" ist im Entstehen.
CaixinOnline
Apr 22, 2014
By
staff reporter Ding Feng
The world’s two largest economies
·
have grown increasingly
interdependent as China provides the United States with cheap products
while holding huge amounts of treasury debts. In return, the USA offers China
its largest export market.
Die
»symbiotischen« Wirtschaftsbeziehungen zwischen den USA und China. Die
Vereinigten Staaten und China sind voneinander
abhängig.
Bremen in 2007
·
But this
pattern is about to change because China has been seeking to adjust its
growth model by
·
relying on domestic
consumption and rebalancing its position in the world economy, says Stephen
Roach, Morgan Stanley's former chairman for Asia and a senior fellow at Yale
University.
·
These changes
are inevitable because staying on the old path will create troubles for both countries
in the long run, Roach says.
A number of disputes between China and United States have arisen
involving trade issues, property rights, cyber security, exchange rates and
other issues. Facing a changing China, Roach said the U.S. government should be
more prudent in handling trade relations with China and make adjustments to its
policies in order to adapt to the transforming bilateral relations.
In a recent interview with
Caixin, Roach talked about the changing relationship and the impact of China’s
rebalancing efforts, as well as his view of China’s reform efforts. Excerpts of
the interview follow.
Caixin: You seem quite optimistic about China’s
rebalancing, but not so optimistic about the United States. Why is that?
Stephen Roach:
I think
·
China has been debating the strategy to shift the model for
seven years, and the 12th Five-year Plan was
enacted three years ago to lay out the broad framework. More recently we’ve had
the 60 articles of reform in the third plenum to really add specificity to the
strategy.
·
So China is
making progress in terms of the concept, as well as the implementation.
Last year, for example, the services sector in China, the tertiary sector, was
larger than the combined manufacturing and construction sectors for the first
time ever. This is the type of progress that China needs to continue on the
road to rebalancing, and I’m very encouraged that these are positive steps in
the right direction.
·
The U.S wants to
go back to the ways in which it’s always grown, which is heavy reliance on
consumption, not much saving, and using policy tools – especially monetary
policy – to squeeze more consumption out of asset markets. And I think
that’s a recipe that’s dangerous and could end in another crisis for the United
States.
So, China’s making progress, America’s trying to do it the same old way,
but I don’t think that’s gonna work over the long haul.
Bremen in 2007
„Die Amerikaner lebten in einer „Überflussgesellschaft auf Pump“. Den künstlich durch Werbung und finanzpolitische Anreize erzeugten Konsumrausch zahlen sie zum überwiegenden Teil nach dem Motto „buy now and pay later“ und vergrößern ihren Schuldenberg von Jahr zu Jahr. Die private US-Zentralbank stellte den Verbrauchern jahrelang billige Kredite zu Verfügung. Das Land wurde mit Liquidität überschwemmt und die Kauflust der Verbraucher wurde kräftig angeheizt…“
Talking about the third plenum of the Communist Party’s 18th Central
Committee and those decisions, how do judge whether this is a success or
failure? What kind of particular events or indexes are you looking at?
The third plenum had 60 articles of reform, several hundred actual
measures, and most importantly established a new implementation mechanism, a
leading committee on deepening reforms. So it’s got all the right pieces, but
now it’s time to look at results.
So I will look at them from a macro point of view:
·
further gains in
the tertiary sector, an improved share of consumption as a share of GDP, moving up hopefully
into the 40 to 45 percent zone in the
next five years or so,
·
still ongoing job
growth in services. And finally
·
I’d like to see some of the high levels of excessive household savings come down,
reflecting
·
greater confidence in social security in the future, with respect to retirement, health care
and other welfare-related expenses.
So, the reforms proposed in the third plenum – such as
·
the hukou
reform,
·
the one-child
policy reform,
·
the interest
rate liberalization,
·
the 30 percent
tax on state-owned enterprises to fund these welfare programs -
they’re all very important pieces to the puzzle that should hopefully
lead China down that path, but there’s no guarantee. Well, I think that China
is, and has been for a number of years, running a large current account
surplus, and it’s now time for China to alter its behavior
·
from a surplus saver
·
to a nation that begins to absorb savings by putting
that savings to work
·
in funding the
social safety net. For too long China’s surplus savings has been directed
at providing support to the American people, and now I think
·
it’s time for China to use its savings to support the
Chinese people. I think minister Lou is correct. Saving is vital for any
economy, but it needs to be put to the most effective uses that a nation
requires, and with China’s rapid aging and massive liabilities for health care,
I can think of no better purpose for China’s surplus savings.
Bremen in 2007
„Wir werden die Binnennachfrage in den nächsten fünf Jahren erheblich stärken, um neue Wachstumsimpulse zu setzen“, sagte Vizepremier Zeng und fügt hinzu: „Gleichzeitig müssen wir aber ein Gleichgewicht zwischen Konsum und Investitionen erzeugen.“
Das Zentralkomitee der Kommunistischen Partei Chinas hatte Ende 2005 einen „Entwicklungsplan“ für die nächsten fünf Jahre vorgeschlagen, der vom chinesischen Volkskongress im März 2006 verabschiedet wurde.
Die Schwerpunkte sind eine
·
ausgeglichene Entwicklung zwischen
Stadt und Land, zwischen den reichen Ostküstengebieten und den Provinzen,
·
die Verringerung der
Einkommensunterschiede zwischen reichen Stadtbewohnern und den armen Bauern,
eine Steuerreform,
·
der Schutz der Umwelt und der
natürlichen Ressourcen, die Einsparung von Energie,
·
der Aufbau eines Systems der sozialen
Sicherung im Gesundheitswesen und bei der Altersversorgung, der Ausbau der
Schul-und Berufsausbildung, eine menschenfreundliche Beschäftigungspolitik, die
Sicherheit am Arbeitsplatz und die Verhinderung industrieller Unfälle.
Die Finanzierung dieser
Vorhaben könnte gelingen.
·
Die Sparquote war in China in der
Vergangenheit mit 45 % sehr hoch und
·
die Chinesen verfügen über riesige
Guthaben.
Seit der Regierungsübernahme von
Präsident Hu und Ministerpräsident Wen Jiabao im Jahre 2003 wurde in China eine
neue strategische Ausrichtung der Entwicklung der chinesischen Gesellschaft
eingeleitet.“
…China has US$
3.8 trillion in foreign exchange reserves. The country has considered
diversification of the holdings, diverging from the U.S. dollar. What’s your
suggestion?
Well there’s been a huge buildup of foreign exchange reserves in China
and I think it reflects a couple of things. One, the large current account
surplus, even though it’s come down,
·
China still has the largest current account surplus in the world. Secondly, the belief
that the yuan will continue to appreciate, and the People’s Bank of China sent
a pretty strong signal earlier this year that it’s now
·
a two-way
fluctuation in the yuan and I think that will do a lot to dampen the
speculative inflows on the yuan. I think that you’re getting closer to the time
when the official level foreign exchange reserves will be nearing a peak.
Whether that peak is US$ 4 trillion, or US$ 4.5 trillion, no one knows. But
·
the rate of the accumulation of foreign exchange reserves is likely to start slowing soon. China does have, and continues to have, a large
overweight in
·
dollar-based
assets – US$ 1.3 trillion in treasuries, and probably another
·
US$ 700 billion
in the agency debt of Fannie Mae and Freddie Mac. That’s a big overweight. The
overweight though reflects the fact that the yuan has been tightly managed
relative to the dollar. Were it not for those purchases of dollar-based assets,
the yuan would have most likely gone up sharply higher. As now China’s central
bank is a little bit more relaxed in terms of the two-way moving of the yuan
versus the dollar.
·
It’s quite
possible that they could
begin to cut back purchases of dollar-based assets and let the currency fall
out more naturally, trading to the downside, rather than limit it to the
upside.
People are starting to worry that a yuan depreciation will lead the
housing bubble could go bust. Do you think there’s a risk of that?
First of all, the yuan has not depreciated a lot. It’s come down 2
percent this year after having risen 35
to 36 percent. You have to put it in perspective. I’m not a big believer
that there’s a massive nationwide housing
bubble in China that’s about to burst. I know many people are, but I think
while there have been speculative problems in some first-tier property markets
in China, the broad support of housing demands through rural migration really
separates China from any other country in terms of looking at the demand side
of the housing market and residential construction activity. So I think that
given the plans for urbanization that were unveiled a week ago, and the
likelihood of at least
·
100 million
Chinese people moving into the cities and needing homes, needing shelter,
needing apartments, I don’t look at a precipitous bursting of a Chinese
property bubble. I don’t think there is nationwide property bubble in China.
You said in your book that the United States should change its situation
of hollowing out the manufacturing base. Dou you feel that the United States
has a structural and employment problem? And do you think the gap could be
filled by new staff and talent?
America needs a growth agenda. We don’t do a five-year plan like China.
We don’t have a third plenum where we debate policy. We don’t really even have
a process by which we set the priorities of economic management. But the one
thing I feel very strongly about is that we’re not going to be able to sustain
our high levels of economic development in the United States if we do not begin
to save again.
·
China saves too
much, we save too little, the answer is probably somewhere in between for both.
And if we could
save again, whether it was reducing budgets, or getting families to save again,
·
we could recycle
that savings into investment and human capital, physical capital,
infrastructure, rebuild our competitiveness and agenda, and then, yes, turn to
exports, goods and services – to countries like China that have extraordinary
opportunities opening up and the potential expansion of domestic demand.
We need to view China as an opportunity for a new growth agenda, not as
a threat to our old growth agenda.
Bremen in 2007
Die
Ökonomie zeichnet den Weg vor…
Der chinesischen Führung ist nicht verborgen geblieben, dass der
US-Regierung früher oder später eine Korrektur ihrer Finanz- und
Haushaltspolitik bevorsteht, wenn die inneramerikanischen Ungleichgewichte
weiter zunehmen werden. Die kreditfinanzierte
Immobilienblase hat unnatürliche Ausmaße angenommen und droht zu platzen. Der
mit Hilfe einer bewusst herbeigeführten, jetzt überbordenden
Liquiditätsschwemme angetriebene Kredit finanzierte Konsumrausch der
amerikanischen Verbraucher droht abzuebben, nachdem die amerikanische
Zentralbank FED den Leitzins von nahe Null kontinuierlich und in relativ kurzer
Zeit auf über fünf Prozent angehoben hat. Es droht ein Nachlassen der
Verbrauchernachfrage in den USA mit empfindlichen Auswirkungen auf die
US-Konjunktur, aber auch auf den Absatz chinesischer Waren auf dem
amerikanischen Markt.
·
Es ist zu erwarten, dass die US-Verbraucher und die US-Regierung in Zukunft
umdenken und mehr sparen werden. Es steht ihnen viel weniger Geld zum Ausgeben
zur Verfügung haben, da sie jahrelang weit über ihre Verhältnisse gelebt und
Geld ausgegeben haben, das sie gar nicht besessen haben. Im Laufe der Zeit
haben die Vereinigten Staaten ganze Schuldenberge aufgehäuft bei den privaten
Haushalten, bei einem Teil der Unternehmen, bei den Kreditinstituten und der
Regierung. Wenn die USA mehr sparen und weniger Kredit getriebene
Finanzgeschäfte betreiben, scheint auf Seiten der USA ein weiteres Anschwellen
des US-Leistungsbilanzdefizits verhindert werden zu können.
·
Es darf weiterhin vermutet werden, dass die US-amerikanische Gesellschaft
in den kommenden Jahre damit beschäftigt sein wird, sich von der zu erwartenden
Finanz- und Wirtschaftskrise zu erholen, sich zu konsolidieren, angehäufte
Schulden zurückzuzahlen und trotz wahrscheinlich sinkender Einkommen und
Steuereinnahmen die auflaufenden Zinsen zu bedienen.“
Chinese industries or companies are also moving up the value chain. Now
they are exporting machinery. Do you see this as competition?
In my eyes I think that China has clear plans to move further up the
value chain in the next few years. The government’s identified seven strategic
emerging industries, such as biotech, electric cars, new age technology, energy
conservation, pollution control and others, whose GDP share I think in 2010 was
3 percent, but by 2018, they’re targeting something like 15 percent. Those are
big increases and very advanced industries, and in many respects potentially
form an overlap with counterpart industries in the United States. So it’s
incumbent upon all countries, whether it’s China or the U.S. or others, to
invest in their people, to invest in their technologies and make certain that
they have a competitive advantage in these industries.
How do you view the so-called “new economy”?
We’ve had a lot of bubbles and fast-growing economies that don’t make
money. We tend to tell ourselves that unlike the late 1990s or the early 2000s,
when the companies whose share price shot up were companies without business
plans and without attractive products, and we thought that that would
eventually end badly, and it did. This time we’re trying to convince ourselves
that there is something of greater substance to these economies. But when you
think about it, to put the valuation that some in the market place on software
apps that allow you to view pictures, how do you really value that? I mean
there’s a lot of users, what kind of money do they make? What’s the business
model? Are we sort of falling into the same trap again as we did in the late 1990s,
just with a whole different type of company? I worry about that.
In your book you warn that if the Sino-U.S. relationship goes awry,
things could get very, very bad. Can you explain that further?
The odds are that things will not get out of hand between the United
States and China. We will from time to time, depending on the political cycle,
talk tough, but not break out into open economic and trade wars. But I wrote in
the book about a scenario that describes a full-blown trade war between China
and the United States, just to make the point to the readers that you can’t
ever say nothing can happen. You have to go through in your mind and think
about the worst-case scenario and use that description of events as a reason to
make certain that it never happens again. So that was the purpose of writing
what I call this "bad dream." It was to describe in great detail what
an outbreak in hostilities between the United States and China might look like,
what it might mean to both economies, which would be devastating, and what it
might mean to the world economy.
In the United States it was really high levels of unemployment. It puts
a lot of pressure on politicians, and politicians don’t know how to fix things
like unemployment. It’s easier for them to blame other countries, like China.
From time to time we’ve had legislation introduced to the U.S Congress
that would be big tariffs on everything China sells into the United States.
Some passed the House, the others passed the Senate. But no bill passed both in
the same year, and yet you really can’t rule that out because I’d like to, as a
risk factor, to keep in the back of your mind to think about if the labor
market stays tough and there are political pressures, it’s still a possibility.
It’s remote, but it’s still a possibility.
Since the financial crisis, have you seen a 'deglobalization’ trend?
I think there are some aspects of this post-crisis period that are
drawing into question the vigor of, say, global traders for an arena of
exchange of goods and services between nations. The global trade share of GDP
recouped the decline of 2009, but it hasn’t grown. So it’s really been flat now
for going on five years. And that follows an extraordinary surge, beginning in
the early 2000s, when China joined the WTO. The growth of global exports has
been more than cut in half. Is this deglobalization? Or is this just weaker
global growth? Probably a combination of the two.
FOBES
Apr 9,
2014
China wants broader economic, political
and military co-operation with the U.S., “a new type of major-power
relationship”, said Chinese President Xi
Jinping…
This change is necessary, however, as
the way China and the U.S. rely on each other is no longer healthy to either
side, says Stephen Roach… The U.S.
paid its price for its overreliance on China’s cheap goods and capital in the financial crisis of 2008, and China’s economy could also be
in danger if it continues with the old growth model, says Roach.
“Too
much saving, current account surplus, unbalanced macro structure, environmental
degradation and pollution in China—(they) all can be traced to an export-led,
manufacturing-driven model that just went too far, courtesy of the American
consumers. In the U.S., it is the opposite. Savings deficits, current account
deficits, excess consumption, reliant on asset bubbles and large fiscal
deficits… in many cases, much of that can also be traced to the support from
the surplus Chinese savers. So as the case for a codependent relationship, you
need to become healthier.”
Roach says the good
news is that China has realized the risks, and it’s making an effort to
redirect its economy toward a consumerist direction. He stresses three elements
that are essential to the success of China’s economic transition—more job
growth, higher wages through urbanization and fixing the social safety net. He
also disputes the argument that China’s debt problems and high housing prices
are serious enough to drag the entire economy down.
Unfortunately, even
as China has already started tweaking its model, Roach says that the U.S. has
already fallen behind in adjusting its own role.
“We
said, ‘we’d like to just keep doing the same thing, thank you’. We have adopted
quantitative easing, for example, by the central bank. The idea the Fed has is
that consumers will spend their wealth created in the stock market. It is an
excess consumption model again. But it’s really far more sinister than that,
because the wealth effect only works for wealthy people. That’s why it’s called
the wealth effect. Very few Americans actually own stocks. It’s really a sad
state of affairs. We need to stimulate saving. The sooner America wakes up to
the longer-term imperatives of boosting its savings rate, the better off we
will be as a nation.”
But how long can America’s “excess consumption
model” last? For now, China remains America’s largest overseas debt holder and
it may continue buying U.S. securities (it dumped $47.8 billion in December but
bought $3.5 billion in January this year). But Roach is convinced that China
would significantly reduce its demand for dollar-denominated assets and
treasuries in the next three to five years. And when that happens, the U.S. is
going to need its own savings to support the economy.
“I do think that the U.S.
has lived beyond its means as its means are defined by the income-generating
capacity of the U.S. labor market. We’ve done that for too long and we have
squandered our saving which is our ability to invest, grow, and consume for the
future… Our savings rate is the lowest of any leading nation has had in modern
economic history. So lacking in saving and wanting to grow, we borrow surplus
savings freely from abroad, from places like China, Germany and Japan. Those
days are coming to an end. China is putting its savings to work in supporting its
economy, not our economy. America has ignored its infrastructure, investing in
human capital and the manufacturing capacity. It ignored its competitiveness. ”
Roach agrees that switching roles (that is more consumption for the Chinese, and more savings for
the Americans) “is always a dangerous thing in any marriage”, especially when
the marriage is of “convenience, not love”, as he described in his previous
writings. China and the U.S. haven’t really be at loggerheads, so is it
possible for the two to actually fall in love?
“It’s
hard to say. Certainly with the situation in Russia, there looks to be a little
bit more love in the eyes of president Obama and Xi when they saw each other
recently in Europe at this nuclear summit.
Love is probably a stretch for these two leading nations. They have so much in
common though. There’s a lot that they can gain from each other in treating the
relationship as an opportunity as opposed to a threat. I’ve been myself
discouraged from time to time as I appear in front of the U.S. congress
testifying on a variety of issues and find that the political sentiment in the
U.S. is overwhelmingly predisposed to view China as a threat.”
Nevertheless, Roach said that China does
“push the envelope” from time to time in areas of global commerce practices and
human rights issues. And it should be held accountable for those matters as the
country rises into an important global power. But more importantly, the U.S.
has to fully realize what China can offer with the building of a prosperous
consumer market.
“Now China is at a critical juncture, a juncture that many developing
economies are unable to move through. This is the middle-income area that often
proved very challenging for poor countries to go through. China’s determined to
do it and if it does do it—and I’m confident they will—that’s an opportunity
for us to participate in as opposed to feel threatened by.”
Knowledge
Apr
3, 2014
By Major Tian
In this interview with CKGSB Knowledge, Roach takes a hard look at the changes
that are happening in China’s economic system and how the current
administration could guide the country through a maze of social and economic
reforms…
Q.
China aspires to transform itself from an export-led economy to a
consumption-led one. How should China go about pursuing its consumerist goals?
A. It’s a very complex, enormous undertaking.
I’ve stressed three major building blocks to the story:
·
more job growth, especially in the service
sector and that’s beginning to happen;
·
higher wages through urbanization, where urban workers on average earn about
three times as their counterparts in the countryside and that’s beginning to
happen; and thirdly,
·
address
the shortcomings of the social safety net.
You can boost labor income by job creation and urbanization, but people will not spend the money. They’ll
save it out of fear that there’s no security for the future. And the
recently concluded Third Plenum of the 18th Party Congress held last November
does provide
a number of potential
reforms that will address the safety net issues,
·
the one-child family planning policy,
·
hukou reform (hukou is China’s household registration system, a hurdle
for citizens to migrate freely),
·
interest rate liberalization, and also
·
a
proposed 30% tax on state-owned
enterprise profits by the year 2020.
These are all to fund
the welfare system. These are all big positives in addressing the social safety
net. So those are the three pieces. Now it’s up to the Chinese leaders to
implement. I’m constructive on that but the proof still remains to be seen.
Q.
As China changes its model, what happens to exports? People are saying this is
the end of “made in China”. Do you believe that?
A. Not for a second. China still
has a very powerful manufacturing base.
A lot of supply chains in Asia still have their hubs in China. China is not
giving up on manufacturing in any way whatsoever. In fact, it’s really moving
up the value chain focusing much more on what the government refers to as
strategic emerging industries, industries such as electric cars, alternative
energy, biotech, new-age information technology where there are plans to really
significantly increase the growth rate in all these industries between now and
2020.
Q.
What are the sectors that are likely to see more imports?
A. I think
that China historically is a very open economy… So if China maintains its
imports share, there’s
·
an enormous opportunity for producers and
trading partners around the world to participate in this shift to internal
demand.
The one I stressed
the most in the book (Unbalanced: The Codependency of America and China) is the
one that’s been tapped the least by foreign trading partners of China. That is
the service area. Services are increasingly tradable. The services’ share of
China is tiny. It’s now up to 46% and had been 43% in 2011. It’s going to grow
probably into the 55% to 60% range between now and 2025. That increase will be
around $12 trillion, just the increase in the scale of the Chinese services
sector. And under some I think reasonable assumptions in describing the
openness, the tradability of the
·
Chinese services sector, that’s a bonanza for
the rest of the world.
It could be anywhere
between $4 trillion and $6 trillion between now and 2025. So a broad variety of
services competitors, especially those in the US, which is preeminent in
services, will
·
have an opportunity to participate in China.
And that would mean
anywhere from retail trade, to domestic transportation, to supply chain
logistics, and finance. The big one, I think for the future, is the opportunity
for foreign companies to get into China’s
healthcare.
Q.
Would you say that China has landed softly?
A. I hesitate to use these words “hard landing”, “soft-landing”. Hard
landing is sort of a devastating house of cards falling down scenario. I’ve
never been in that [camp] in China. Most people are always looking at China [as
though there is] a hard landing right around the corner. The growth rate is
slow, but
·
the employment generation in China has
actually accelerated. So what does that tell you? It tells you that when you
pick apart the numbers and you see where the growth rate has slowed is the slow
[growth] predominately in the so-called secondary sector which is manufacturing
and construction. You would expect that given the focus that manufacturing has
on export-led economic growth. The rest of the world is still growing very
slowly. Where the growth rate is picked up is in the services sector, the
tertiary sector. And for the first time in modern Chinese history,
·
the services sector is now the largest sector
in the Chinese economy—46% in 2013,
and actually exceeded that of manufacturing-and-construction-combined 44%. So
what you have is that, the composition of
·
GDP growth in China is shifting from
capital-intensive manufacturing to labor-intensive services. GDP is slowing, employment is picking up.
That’s not a landing. That’s a great transition from the old China to the new
China.
Q.
There are also some fears about China’s economy, such as the real estate
bubble, shadow banking, and increasing local debt. Are these fears overblown?
A. I think all these fears are
based on legitimate concerns. There has been too much debt in China, and there
has been rapid growth in shadow banking. There has been excessive house price
appreciation, making affordable shelter increasingly difficult for many Chinese
people. But the question you asked is the right question. Are these concerns at
risk of bringing the entire economy down? Are they preconditions of massive
amount of systemic risk, the likes of which we saw in the crisis in 2008 and
2009? My answer is absolutely not. For every one of these problems, there are
factors on the other side of the equation that should temper your concern. The property bubble is at the top of
everyone’s list. What’s missing in an assessment of the excess house price appreciation
is
·
the fact
that
·
there’s an enormous organic demand for shelter
in China given the extraordinary pace of rural-urban migration. It’s been running 15 to 20 million a year since
the year 2000. We’ll do another 100 million between now and 2020. Newly
migrated residents of urban areas need shelter.
·
They have
demand for housing.
Shadow banking, it’s
worrisome. The shadow banking sector
in China, by IMF or Financial Stability Board estimates, is growing rapidly.
But it’s growing off of a low base. The Financial Stability Board estimates for
2012, the last data point that’s available, the shadow banking sector in China
is 26% of GDP. The global norm is over 110%. So it’s growing rapidly off of a
low base. And the debt situation in local governments is definitely worrisome.
The government has conducted an audit indicating the extent of the problem. The
People’s Bank of China is definitely sending strong signals that it is trying
to implement much tighter conditions on overnight bank funding markets to slow
down the pace of credit creation and awing China of this dangerous string of
debt-intensive growth.