In his recent SCMP article, Dr Andy Xie opined that China is using its downturn to deflate bubbles and raise productivity while the US is doing the opposite – feeding the Bernanke bubble and hoping for an AI cure for falling productivity. Therefore, China’s economy is more sustainable than commonly believed.
China’s economy has been plagued by “twin cancers”: a property bubble and shadow banking system rife with Ponzi schemes. A bunch of very destructive people screamed “GDP!” and “jobs!” to get the government to print money. China was marching to the cliff. But the government stopped feeding the beasts two years ago.
But as the bubbles deflate, Chinese businesses are focusing more on productive, but less glamorous, activities such as becoming better at making things. The breakout success of China’s electric vehicle sector is probably the most important one. The automobile sector is a major chunk of global manufacturing and much bigger than the smartphone market. China’s transition towards electric vehicles was inevitable.
Chinese companies are not just leading, they are also innovating faster than their competitors and can dominate the global auto sector in the coming decade. Countries competitive in automotive-making have traditionally become high-income economies. China may well go down that path.
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.