China’s economy: Work in progress
High profile political and economic events ironically make for good networking opportunities. For the past week, my email inbox, text server and phone have been ringing off-the-hook regarding China’s currency and stock market reports. However, conspicuously absent from this inquiry stream has been a single question from my contacts in China or Hong Kong. Why? Because everyone knows their own economies go through requisite 7-8 year cycles and it’s just a matter of time before China gets theirs back on track. The US is no stranger to this given our booms and busts in 2000 and 2008.
President Xi Jinping expected this when his term began in March, 2013, so much so that he included economics on his top level priority list of reducing graft, improving the economy and increasing domestic consumption. The big difference, of course, is the central planning nature of China’s economy, which pundits for some reason expect should make the Middle Kingdom immune.
There are some key elements at work here, which we must give credence to:
1) China is a nation of savers. Increasing domestic consumption is not an easy task.
2) Although many of China’s exports are no longer affordable, the tradeoff has been prolonged economic prosperity for the middle class, due to higher wages.
3) The process takes time. Even in the wake of natural disasters, Japan gradually improved itself over time.
4) Currency revaluation often seems like a last resort, given its international heft. Everyone has been focusing on how this will negatively impact China’s export markets, as opposed to the increased purchasing power it will provide the average Chinese for buying imports.
5) Even in the wake of poor economic news, China continues to be the world’s 2nd largest economy.
I’m always excited about traveling to China but the timing of my upcoming trip to discuss international entrepreneurship and managerial accounting practices couldn’t be better. Thank you again to CCAFM and the Chinese division of the IMA for sponsoring this. Below is an advertisement for the event.
(Cover photo courtesy of Angela Nguyen)