Edmund Phelps, winner of the 2006 Nobel Prize in Economics, yesterday said the Chinese economy will grow more independent from the West over the next 10 years, driven by enterprise innovations and domestic consumption.
“China is surely moving toward less export-dependent and [is becoming] more dependent on domestic investment activities,” he told a Taipei forum titled “A vision of possible developments in the global economy.”
By then, its economic prowess — in terms of unemployment rate and workers’ productivity — will mirror the US in its best days, he said.
The Columbia University academic also pointed out that China will not fail in efforts to step up domestic innovations — a pivotal element he said US enterprises have been lacking, and that this will propel its investment activities to a greater height.
One of the reasons was rising Asian currencies against the greenback because of the sluggish US economy, which has seen enterprises investing less in commercial activities and productivity slumping in the past decade, Phelps said.
In Phelps’ view, the US is far from seeing a full recovery to pre-financial crisis levels, with unemployment hovering between 7 percent and 8 percent as the best case scenario.
This compares with a 4.6 percent US jobless rate during former US president George H.W. Bush’s administration and 5.6 percent in the mid-1990s, he said.
In contrast, Asia, especially China, and other emerging markets like Brazil will catch up with the US in economic growth.
This is because the US is in “the midst of a long structural slump,” obvious from the fact that more investors are shortsighted instead of looking far ahead with their investment portfolios, he added.
The Nobel laureate said US stocks are now closely linked to company quarterly -earnings, which strays from the fact that share prices should reflect investors’ anticipation of a company’s worth over the next five years.
“CEOs are now more concerned with hiding their quarterly earnings targets, rather than thinking about the company’s innovations for the next five years,” the 78-year-old Phelps said.
Phelps last year took up the position of president-dean of the New Huadu Business School at Minjiang University in Fuzhou, China.
He said this position offers him the proximity to study the impact of the Chinese economy.
Phelps yesterday also witnessed the signing of a memorandum of understanding between New Huadu and Taiwan’s National Chengchi University, which co-launched a program to develop entrepreneurship among their students.
A total of 60 students will be selected from both schools and sent for courses in Singapore.
They will be offered employment at New Huadu Industrial Group Co (新華都集團), a conglomerate based in Fujian Province that is engaged in the property, retail, tourism, mining and machinery sectors.
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