China has the potential to be the engine for international growth says Cass professor
Tuesday, 22 June, 2010
Assuming global growth remains weak for some time, Professor Andrew Clare says China will need to put more emphasis
on private consumption, rather than investment. He says: Private consumption in China is low compared to
historical standards and the savings ratio is extremely high. China should start using savings funds to
generate consumption and thus become the engine for global growth in the future. If this strategy was employed
China would no longer be dependent on growth outside China for its prosperity.
Professor Clare made these comments at a workshop on Monday 21 June in Shanghai as part of Cass Business School’s annual China Symposium. One of the ways to bring a sustained, international economic recovery is for the renmimbi to appreciate, according to Professor Clare. He said the announcement by Chinese authorities on Saturday to bring more flexibility to the renmimbi is being well received by the rest of the world as it is a small step in the right direction to rebalance the global economy. He says, The world’s economy needs to rebalance and for this we need a fully convertible Chinese currency. I understand that is a way off, but it should certainly be a goal for the Chinese authorities in the next five to 10 years.
He also said the financial crisis is not over and within the next two years we should expect another crisis in the European Union. Professor Clare predicted that, as a result of the debt crisis in Europe, the Euro would cease to exist in the future. Over the last few years we’ve seen the beginning of the end of the Euro. It is not possible for such a diverse group of economies to run with one currency unless you have political unions. Unless the European Union becomes a union with one government and one fiscal authority, the Euro currency will fail.
Professor Clare did predict a recovery for the global economy but said it would not be fast. He said: A slow recovery globally is not good news for the UK. In the UK, debt levels are high, but the sterling currency has been devalued around 25 percent. This should help to raise exports and reduce imports, which is what Greece needed for their economy, but was not possible with Greece tied to the Euro.
Professor Clare is among a delegation of academics from Cass who are visiting Shanghai for the School’s annual China Symposium. The Symposium forms an international MBA study elective, which has been running for six consecutive years since 2004.
Held from 21-25, June, 2010, the week-long symposium allows the 130 Cass students to learn about the Chinese market and business through an intensive array of lectures and discussions with leading business representatives. With site trips to visit different facilities in automotive, chemical and electronics industries, the symposium will equip Cass students with the first-hand knowledge needed to work effectively in China. In addition, it also provides an opportunity for the students to network with more than 1200 China-based alumni, the largest of Cass’s alumni communities.
Also in the academic delegation are the Dean of Cass Business School, Richard Gillingwater, and Dr Gianvito Lanzolla, Reader in Strategy. Highlight speakers include Ronnie Chan, Chairman, Han Lung Properties Ltd; Tor Peterson, Founder and CEO, ENO Sports; Dicky Yip, Chief Executive, Bank of Communications; Kathy Xu - Director, Capital Today Private Equity; and Mike Wilkins, Managing Director Global Carbon Markets, Standard and Poor’s.