Wednesday, March 23, 2005

China Development Forum

Stephen Roach of Morgan Stanley on latest China Development Forum. He is not expecting any near-term drastic changes in RMB policy.

"My bottom line for the markets: With China’s risk-reward calculus acutely sensitive to the all-important stability constraint, I read the message from this year’s China Development Forum as pretty much a green light on the growth front. 

As always, the highlight of this conference is a private session with the Premier in the Great Hall of the People.   Not surprisingly, this year’s discussions were framed around the hot topic du jour -- Chinese currency policy.  Our group of outside experts laid out both sides of the debate to Wen Jiabao.  He said nothing to tip his hand and simply reiterated that China continues to actively study the issue and is “now trying to select both the proper plan and timing for RMB reform.”  Here, as well, I suspect it will all boil down to stability.  In my own speech to the Forum, I stressed that the coming global rebalancing could have surprisingly important implications for Chinese stability -- especially for a dollar-pegged currency that gets caught up in America’s long overdue current account adjustment (see “China’s Rebalancing Imperatives,” presented to the China Development Forum, 20 March 2005).  Because of its rapid integration into the global economy and world financial markets, China may well find that its stability anchor is less secure than widely perceived.

At the end of the meeting, the Premier shook his head and exclaimed, “I cannot sleep well at night with this issue of the RMB.”   He then glanced at his watch and politely excused himself.  As we left the Great Hall, a noisy motorcade rolled up to the official entrance.  We went out one door, and US Secretary of State Condoleezza Rice literally went in the other door.  There was a lot on Premier Wen Jiabao’s plate that day.  The growth and currency debates are only one piece in the big Chinese puzzle.  But in the end, always think stability when it comes to China -- whether the issue is economic or geopolitical.  For that reason alone, and based on what I picked up at this year’s China Development Forum, I have little reason to doubt that China is once again going for growth."


Anonymous said...

Investment Bubble Builds New China

YANGSHUO, China - Nature spent millennia carving the jagged limestone mountains of Guangxi Province into the fanciful forest of stand-alone peaks so prized by ancient painters and modern tourists.

Ren Ping and his crew of a few dozen migrant workers have been at their jobs only a few months, but the elevated superhighway they are building has already burrowed a path through the prehistoric crags. 'We'll go around this one, but we will have to slice through that one over there,' Mr. Ren said over the roar of dump trucks pouring cement. 'Drivers on this road will have the most beautiful view in all China.'

Environmentalists are less enthusiastic. But the highway will link mountainous northern Guangxi to the booming Pearl River delta in the southeast. It is the sort of grand development project that elicits official support and opens checkbooks in China's economy, which some critics say has become dangerously dependent on such state-directed spending.

After a road-building campaign unmatched by any country except the United States in the 1950's, China has created an extensive network of multiple-lane highways, complete with landscaped verges and well-equipped rest areas.

The Communications Ministry announced in January that it planned to pave a further 53,000 miles of intercity highways and urban ring roads within 30 years at a cost of $250 billion. Total mileage is expected to overtake the American Interstate system, the world's biggest, around 2020.

The spending has transformed China's landscape, adding roads, bridges, subways and ports - as well as factories, mines, steel mills and power plants - that could provide the foundation for double-digit growth far into the future.

But to an extent that is alarming some Chinese and Western economists, such investment itself is a main driver of China's economy, which grew at a 9.5 percent pace last year. The investment binge, like any bubble, could produce unneeded factories and underused highways and power plants, weakening the country's already shaky financial system....


Anonymous said...

Wave of Corruption Tarnishes China's Extraordinary Growth

SHANGHAI - China has been shaken by a series of large-scale bank robberies in recent years, but they are not the Bonnie-and-Clyde type.

These are inside jobs: top executives, branch managers, loan officers and thousands of everyday employees have been running off with billions in customers' money.

Consider what has happened in just the first two months of 2005. First, a branch manager at the Bank of China disappeared with more than $100 million in cash. A few weeks later, dozens of employees of another commercial bank were arrested for conspiring to steal nearly $1 billion. And then midlevel officials of the China Construction Bank fled with about $8 million.

There is no word yet whether any of the money has been recovered. But the chain of events underlines an ugly byproduct of China's aggressive embrace of a freewheeling, get-rich-quick form of capitalism: a long-running wave of corporate and government corruption scandals.

The financial scandal watch gained new prominence last week with news reports that Zhang Enzhao, the head of the China Construction Bank, resigned after a lawsuit accused him of having accepted a $1 million bribe from an American company, Alltel Information Services.

The bank later issued a statement saying he resigned for 'personal reasons.'

The scandals are by no means limited to banks....


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kunal said...

I would have enjoyed it much more if there was a bigger focus on the people but anyway, this artwork is brilliant.

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