Roach - thanks China Internet Information Center
China Internet Information Center
Morgan Stanley Chief Economist: Why We Ought to Thank the Chinese
In an article published in the latest issue of Fortune magazine titled Why We Ought to Be Thanking the Chinese, Stephen Roach, chief economist of Morgan Stanley said, it's because China has filled up the huge gap Washington generated in the US economy.
Roach believes that RMB being pegged to the US dollar was once a focal point of debates. Recently Federal Reserve Chairman Greenspan viewed the rumor that RMB would appreciate 5 percent as a "fairly reasonable expectation". This couldn't be more wrong. Roach said people in vexation are easy to neglect what extraordinary benefit China a rapidly developing country has brought to the world, especially to the United States. Of the record-breaking $540 billion in the US trade deficit in 2003 China does account for certain percentage. Nevertheless, the deficit was not made by Beijing, but by Washington. Due to the loss of control on federal budgetary deficit the US has almost depleted its national savings. To sustain what economic growth need in investment domestic savings shortfall must be offset by surplus savings from abroad. Apart from continually increasing balance-of-payments and trade deficit so as to attract foreign capitals, America has no other alternatives.
Roach said China played a very important role in filling up the gap in the US economy. Indeed the biggest beneficiary of the Sino-US trade is the consumer. Last year the United States imported from China more than $150 billion worth of cheap, high-quality commodities, which was conducive to the control on inflation ratio. With the exception of oil products prices of import commodities grew by only 1 percent. This was an extremely small rise for the weakening dollar and a rapidly growing economy. Low inflation provides the job-short and income-constrained US consumers with extra purchasing power. For this America should express its thanks to China. China used most of the profits gained from export to reinvest in mainly dollar-based financial assets. Up to last November China possessed $144 billion US treasury bonds, namely, China possessed 9.6 percent of the total holdings of foreign-currency government securities. It was three times that of 1994. Among the foreign holders China ranks No.2, second only to Japan, yet far surpasses the No.3 holder - Britain. This is by no means something insignificant Roach said. Under normal circumstances large-scale government loans would drive up financing cost. But China's active purchase of American treasury bonds can prevent this from happening. By keeping exchange rate low China is in fact providing America with more opportunities for economic growth.
Roach said the USA is not the only one who should be grateful to China's rising up. The rapid influx of transnational corporations has turned China into a link of the global supply chain. In China's total export growth over the last 10 years, 65 percent came from the subsidiary companies and joint ventures of transnational companies set up in China by Japan, the United States and Europe. By replacing high cost operation with low cost production in developing countries such as China, consumers worldwide eventually partake in the benefits resulting from this. In the meantime China has become main source of growth of its neighbors and other Asian countries.
Roach believes that the theory of "China Threat" put forward in an age of economic globalization is not apt at all. The world should thank China for its insistence in changing state-owned economy. For China this is the only way to sustainable prosperity but for other countries, it is an opportunity to tap for a huge market.
(People's Daily March 19, 2004)
Morgan Stanley Chief Economist: Why We Ought to Thank the Chinese
In an article published in the latest issue of Fortune magazine titled Why We Ought to Be Thanking the Chinese, Stephen Roach, chief economist of Morgan Stanley said, it's because China has filled up the huge gap Washington generated in the US economy.
Roach believes that RMB being pegged to the US dollar was once a focal point of debates. Recently Federal Reserve Chairman Greenspan viewed the rumor that RMB would appreciate 5 percent as a "fairly reasonable expectation". This couldn't be more wrong. Roach said people in vexation are easy to neglect what extraordinary benefit China a rapidly developing country has brought to the world, especially to the United States. Of the record-breaking $540 billion in the US trade deficit in 2003 China does account for certain percentage. Nevertheless, the deficit was not made by Beijing, but by Washington. Due to the loss of control on federal budgetary deficit the US has almost depleted its national savings. To sustain what economic growth need in investment domestic savings shortfall must be offset by surplus savings from abroad. Apart from continually increasing balance-of-payments and trade deficit so as to attract foreign capitals, America has no other alternatives.
Roach said China played a very important role in filling up the gap in the US economy. Indeed the biggest beneficiary of the Sino-US trade is the consumer. Last year the United States imported from China more than $150 billion worth of cheap, high-quality commodities, which was conducive to the control on inflation ratio. With the exception of oil products prices of import commodities grew by only 1 percent. This was an extremely small rise for the weakening dollar and a rapidly growing economy. Low inflation provides the job-short and income-constrained US consumers with extra purchasing power. For this America should express its thanks to China. China used most of the profits gained from export to reinvest in mainly dollar-based financial assets. Up to last November China possessed $144 billion US treasury bonds, namely, China possessed 9.6 percent of the total holdings of foreign-currency government securities. It was three times that of 1994. Among the foreign holders China ranks No.2, second only to Japan, yet far surpasses the No.3 holder - Britain. This is by no means something insignificant Roach said. Under normal circumstances large-scale government loans would drive up financing cost. But China's active purchase of American treasury bonds can prevent this from happening. By keeping exchange rate low China is in fact providing America with more opportunities for economic growth.
Roach said the USA is not the only one who should be grateful to China's rising up. The rapid influx of transnational corporations has turned China into a link of the global supply chain. In China's total export growth over the last 10 years, 65 percent came from the subsidiary companies and joint ventures of transnational companies set up in China by Japan, the United States and Europe. By replacing high cost operation with low cost production in developing countries such as China, consumers worldwide eventually partake in the benefits resulting from this. In the meantime China has become main source of growth of its neighbors and other Asian countries.
Roach believes that the theory of "China Threat" put forward in an age of economic globalization is not apt at all. The world should thank China for its insistence in changing state-owned economy. For China this is the only way to sustainable prosperity but for other countries, it is an opportunity to tap for a huge market.
(People's Daily March 19, 2004)
posted by Eastlaw at 3:53 AM
0 Comments:
Post a Comment
<< Home