Stephen Roach, senior fellow at Yale's Jackson Institute of Global Affairs and an expert on China, has heard it all before. As soon as it looks like the Chinese economy is falling short of previous periods of remarkable growth, people start predicting its doom. "Property, debt, reforms, anti-corruption, human rights, Hong Kong— all these things coming together and China is widely thought to be down for the count," he said. "But these type of views have been wrong for the past 20 years. China is ultimately a huge opportunity for the global investor."
Roach spoke with Yale World Fellow Shu "George" Chen, financial editor and columnist for the South China Morning Post, in a conversation presented by Yale SOM's Business and Politics Club on November 4. Though both believe China is anything but doomed, they spent much of their hour together discussing the problems facing the world’s most populous country.
Chen, who writes a lot about the country’s two financial centers, Hong Kong and Shanghai, is particularly concerned about the state of Hong Kong, which he believes could be on the decline as a global financial player. Party leaders in Beijing have made a significant push to turn Shanghai into a global financial center, possibly to the detriment of Hong Kong, which recently saw huge protests against the central Chinese government. “All in all,” he said, "the situation isn’t bright in Hong Kong. The gap between Hong Kong, particularly the young, and the rest of China is so large."
Chen and Roach went on to discuss the need for China to let its currency float on international exchanges; at what point government debt becomes unsustainable; and how the reach of state-owned enterprises continues to be an impediment to the Chinese economy. But Chen remains convinced that China will continue its rise to the top of the global economy. "But it's not the rise of China," he said. "It's the revival of China."
He pointed to the IPO of e-commerce giant Alibaba on the New York Stock Exchange as a crucial benchmark in the country's birth as a global economic power. "Five years ago, if you had said to Wall Street that the biggest American IPO would be a Chinese company, nobody would’ve believed it."