Fareed Zakaria on Crisis, China and Asia
I attended a talk by FZ at the Deutsche Bank conference in Singapore yesterday. Here are a few relevant points, as i understood and interpreted, from the talk.
* The global economic system has undergone a big shift and is marked by its resilience over the last two decades. It has sprung back with a ferocity post almost all crisis situations.
FZ attributes this to three drivers:
* Era of political stability
* Era of economic stability with hyperinflation under control
* Era of tremendous technological connectivity
Asia is the cockpit leading the rise of the rest of the world (non developed economies) primarily driven by
* spread of globalization
* rising consumer spending in Asia as a percentage of GDP
* increase in intra-Asian trade flows
A diffusion of knowledge leading to competence in economic management has also contributed to the rise of the rest of the world (developing economies). In many cases, it can be argued that, over the last decade, the risk premiums associated with developing economies should actually have been applied to developed economies, as the developing nations have done a much more prudent job in sound fiscal management. If we look at G20 nations, the average debt to GDP ratio for G7 is 120% while the ratio is a much more manageable 40% for G13 nations.
FZ then touched upon the mandatory references to China and India. He made a point with which i concur : the so called comparisons between India and China are uncalled for.... China is way ahead of India. China's infrastructure is miles ahead of India. However, unlike China, India has clarity on its political system which is likely to look similar to today's, 50 years hence. Another point to note is the dynamic private sector in India which uses capital much more efficiently than Chinese enterprises.
China has undergone a period of extraordinary transition from a poor to a fairly affluent nation. A couple of interesting observations on China were as follows:
* China is increasingly functioning through a process of consensus based decision making as it develops its institutions. Decision making is no longer the exclusive preserve of a few men handpicked by Deng Xiaoping.
* China is going through an inward looking phase as it focuses on domestic sector.
* there is a sense of confidence that is palpable and it is reinforced by its handling of the economic crisis and its aftermath.
* Increasingly Chinese foreign policy is being driven by the twin objectives of ensuring viability of commodity supply routes and minimizing disruptions to its inward focus while ensuring that Taiwan remains handleable.
As understood by me.
Atim Kabra
Singapore
May 11, 2010
