Home » Business » Biz Special
Henkel sees no rationale for pessimism on China
Print Edition
THE world economy is growing more slowly than in recent years — with little sign of any upturn in the short term. The US central bank proved it when it postponed a hike in interest rates, which was taken for granted only a few months ago.
With the United States having shown encouraging development, it is safe to assume that the cause for slowing growth lies elsewhere. Even the economic uncertainties in Europe cannot be seen as the main reasons. Rather, the emerging markets are the cause of concern.
Indeed, growth, which was strong for a long time there, has considerably declined. According to estimates, the economy in these markets is growing between 3 and 4 percent, which would be the lowest increase since the financial crisis.
The currencies of these countries are currently at their weakest since 2002, with large capital outflows ensuing. And in China, share prices have truly collapsed, falling by around 40 percent in the last three months.
This summer, the Chinese central bank allowed the yuan to depreciate several times at short intervals, causing shockwaves through the world economy. Reasons enough for pessimists to paint a picture of doom and gloom.
Many emerging markets have rightly had a wake-up call. A number of commodity-rich countries have failed to use the boom years of high raw-material prices in order to reduce their dependence on natural resources or further develop their economic systems.
However, we are far from a deep-rooted crisis in the emerging markets of the kind witnessed at the end of the last millennium. The lessons from the Asian crisis of that time have been learned almost everywhere. The currencies of most of the developing economies are no longer fixed. Some such nations have accumulated appreciable foreign-currency reserves and current-account surpluses, and dependence on foreign capital has declined.
The role of the state in establishing the conditions for economic development is also essential.
In India, the government is working hard to promote industrial growth across the country. In China, too, the politicians are sending out clear signals intended to accelerate structural reforms and thus strengthen the economy. Demands for something similar have likewise been directed just recently by the German government toward Brazil in an effort to avert the threat of recession.
Inappropriate pessimism
Despite justified concerns about the ongoing development of emerging markets, I consider this mix of pessimism and high-minded lecturing to be inappropriate. China is not faltering. It has merely seen its rate of growth slow. Even in this year and the next, if its economic growth is no more than 4 to 6 percent, that will still constitute an appreciable contribution to world economic growth.
I am not closing my eyes to the obvious problems that exist. However, after the gold rush sentiment that some emerging markets have experienced in previous years, perhaps we should also acknowledge that economic cycles with their upturns and downswings are a fact of life.
A country such as China can actually benefit from a period of consolidation because the boom years also brought an accumulation of risks and threats. I am thinking here particularly about the issue of environmental protection, the high levels of debt that built up at banks, corporations and provincial governments, and the booming shadow banking sector.
Even though many emerging markets are experiencing more difficulties than in past years, I am firmly convinced that they will continue to play an ever more important role in the global economy going forward. There are also good demographic reasons for this. Populations in almost all the emerging markets are growing fast.
Moreover, many emerging nations have seen the development of a well-educated middle class. By nurturing its service sector, for example, India has managed to create major hubs of highly qualified IT specialists, placing the country in a position to offer related services to numerous international corporations.
The establishment of a middle class also leads to increasing consumption and a desire for enhanced quality of life. Since the mid-1980s, India has seen around 1 percent of its population annually rise above the poverty line. This not only benefits the domestic economy but also increases demand for international consumer goods.
And the potential that exists in China and India in the field of digitalization is also huge. Already today, those two countries account for over one billion Internet users, with the trend continuing to increase sharply.
I consider, however, that even if the emerging markets may have dropped down a gear, there is no reason to doubt their ability to drive future success.
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
