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.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
RSS