China needs to move faster to stimulate its domestic consumption to support the global economy, Morgan Stanley Asia chairman Stephen Roach said.
“They need to put a much better balance into their stimulus package and their macroeconomic structure,” Roach said in an interview on Bloomberg Television yesterday.
China is spending 4 trillion yuan (US$586 billion) to boost growth, most of it on infrastructure such as roads and airports.
The IMF said on Wednesday that China’s low debt level gives it room to increase government spending to counter rising unemployment.
Fixed-asset investment accounted for 87 percent of China’s economic growth, Roach said, adding that the government needs to spend more on social security, which he estimated represents only about US$90 a worker.
“Consumers lacking a safety net save to excess — and that inhibits the growth of more broadly based consumption,” Roach said.
He said US$90 “goes a long way in China, but that’s just not going to cut it.”
Weak consumption means the nation can’t be the main driver of global growth, he said, estimating China’s population of 1.3 billion generates about US$2 trillion in demand, compared with the US$10 trillion in the US, which has about a quarter of the population.
“The difference between these two markets and what they can do for driving the global economy are like night and day,” Roach said. “China cannot lead the world out of recession.”
The IMF said that rebalancing China’s economy too rapidly toward domestic consumption “could raise unemployment as jobs are shed in export-oriented sectors.”
China’s unemployment rate is projected to rise to an annual average of 4.4 percent this year from 4.1 percent last year, the IMF report said. China’s official urban jobless rate, which understates unemployment because it excludes millions of migrant workers, was 4.3 percent in the first quarter.
IMF directors “generally saw further room for a targeted, additional stimulus aimed at increasing private consumption through near-term fiscal measures to raise household income,” the report said.
The IMF’s assessment contrasts with that of the World Bank, which last month advised China to delay any additional spending until next year.
China’s economic growth accelerated to 7.9 percent in the second quarter from a year earlier because of record lending in the first half of the year. It expanded 6.1 percent in the first three months of the year.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)