In Dr Andy Xie ‘s recent SCMP article, he argued that as the trade war reduces China’s US exports, structural reforms, not inflating away debt, are the right response to economic disengagement.
If China goes back to inflation to solve its debt problem, the resulting erosion of confidence in the renminbi would have a profound impact on long-term financial stability. Short-term GDP growth is not important for China.
As Chinese people are so productive, stability and an open market would naturally lead to prosperity. We must remember that currency instability has been a major factor in China’s difficult history over the past century. Beijing should treasure currency stability over any short-term policy advantage.
China should use the current crisis as a trigger to address all the structural problems unaddressed before it joined the World Trade Organisation or which have festered since. In particular, it must stop believing that bubbles are tools of development. The short-term benefit, whatever it may be, is far outweighed by long-term cost. China is sitting on one of the biggest property bubbles in human history. How Beijing reacts to its bursting will determine the country’s future for decades to come.
Read the rest of the SCMP article here.
Dr Andy Xie 謝國忠 is a renowned Chinese economist based in Shanghai who has been named one of the “50 Most Influential Persons in Finance” by Bloomberg.
Andy Xie’s skill and has been tried and tested through the years. He is one of the few economists who has accurately predicted economic bubbles including the 1997 Asian Financial Crisis and the more recent subprime meltdown in the United States.
He joined Morgan Stanley in 1997 and was Managing Director and Head of the firm’s Asia/Pacific economics team until 2006. Before that, Andy spent two years with Macquarie Bank in Singapore an associate director in corporate finance and five years as an economist with the World Bank. Dr Andy Xie is currently a director of Rosetta Stone Advisors.
Dr Xie earned a PhD in economics in 1990 and an MS in civil engineering in 1987 from the Massachusetts Institute of Technology.