Fears over China’s GDP ‘un­war­ranted’

For­mer chair­man of Lloyds Bank­ing Group says even 6 per­cent growth would present few con­cerns, Ce­cily Liu re­ports.

China Daily (Canada) - - EXPATS -

Win­fried Bischoff has done the math, and he said he has no con­cerns about China’s slow­ing eco­nomic growth.

Ac­cord­ing to the for­mer Lloyd’s Bank­ing Group chair­man, record­ing a growth rate of just 6 per­cent this year would be the equiv­a­lent of record­ing 10 per­cent in 2008.

“Who would have wor­ried about 10 per­cent in 2008?” he asked.

Bischoff said his cal­cu­la­tion is based on fig­ures from a re­cent Stan­dard & Poor’s re­search ar­ti­cle on China’s con­tri­bu­tion to global eco­nomic growth in 2014.

“Peo­ple worry about China, but I don’t worry,” he said. “China will con­tinue to do well in growth terms, al­though less in per­cent­age terms. China is catch­ing up with the United States, and we think 3 to 4 per­cent growth is fan­tas­tic for the US, so we have to get real about China’s growth rate.

“China’s great­est con­tri­bu­tion to the world is to keep do­ing what it has been do­ing, which is to grow con­sump­tion.”

In fact, he be­lieves the coun­try’s con­tri­bu­tion to global growth — in Asia, in par­tic­u­lar — could have the same ef­fect as when the US launched its Mar­shall Plan in the late 1940s.

Un­der the plan, of­fi­cially known as the Euro­pean Re­cov­ery Pro­gram, the US gave $13 bil­lion — equal to about $90 bil­lion in to­day’s money — to help re­build Western Europe af­ter World War II. As a re­sult, as th­ese na­tions re­cov­ered, their cit­i­zens were more able to buy Amer­i­can prod­ucts.

“You can­not be­come rich on your own be­cause un­less your neigh­bors be­come rich you can’t sell,” Bischoff said. “The Mar­shall Plan helped Europe with credit and loans. The US econ­omy needed coun­tries to be able to ab­sorb the sub­stan­tial pro­duc­tion of which it was ca­pa­ble.

“My anal­ogy is that, in or­der for China to con­tinue to pros­per, it may need to help some of its cus­tomer coun­tries in two ways: Credit or, more di­rectly, buy­ing th­ese coun­tries’ goods or raw ma­te­ri­als. Growth in the do­mes­tic econ­omy should en­able both of th­ese ac­tions.”

Bischoff, now chair­man of the United King­dom and Ire­land Fi­nan­cial Re­port­ing Coun­cil, a pri­vate body that pro­motes in­vest­ment, has had a long ca­reer in Lon­don’s fi­nan­cial ser­vices in­dus­try. Be­fore tak­ing the helm at Lloyds in 2009, he held top po­si­tions with Cit­i­group and Schroders.

Over his ca­reer, he has wit­nessed first­hand the rapid rise of China, which has in­creas­ingly be­come in­te­grated in the global econ­omy through its in­vest­ments and the in­ter­na­tion­al­iza­tion of its cur­rency, the ren­minbi.

“There is a lot of cur­rency, trade and in­vest­ment flow into and from China,” he said. “There is will­ing­ness among many global com­pa­nies to start op­er­a­tions in China, and more Chi­nese com­pa­nies have been go­ing global, es­pe­cially in the past three to four years. It’s pos­i­tive be­cause the two-way trade is not just in goods.”

In Novem­ber the In­ter­na­tional Mon­e­tary Fund de­cided to in­clude the ren­minbi in its spe­cial draw­ing rights bas­ket, which was hailed as a mile­stone in China’s ef­forts to make the ren­minbi a ma­jor global re­serve cur­rency.

For Bischoff, the de­ci­sion was sig­nif­i­cant be­cause he feels it gives the ren­minbi an in­ter­na­tional sta­tus that re­flects China’s eco­nomic strength, and will help China’s in­te­gra­tion into the world fi­nan­cial sys­tems. “The Peo­ple’s Bank of China (the cen­tral bank) has a great de­sire to make the ren­minbi a re­serve cur­rency, and it re­flects China’s eco­nomic strength and out­ward vi­sion.”

Chi­nese ex­plorer Zheng He’s ex­pe­di­tion to Africa in the 15th cen­tury is an ex­am­ple of the coun­try’s out­ward-look­ing mind-set, he said, but since then China has largely fo­cused in­ward. That is chang­ing, though, as the econ­omy be­comes more in­ter­na­tional, he said.

China has been seek­ing to re­bal­ance its econ­omy in re­cent years, mov­ing away from re­ly­ing on ex­ports-driven man­u­fac­tur­ing to high­value-added ser­vice sec­tors and do­mes­tic con­sump­tion.

To en­sure the tran­si­tion is suc­cess­ful, Bischoff said, main­tain­ing so­cial co­he­sion is the most im­por­tant el­e­ment when it comes to pre­vent­ing China from fall­ing into the so-called mid­dlein­come trap. “In the coun­try­side and the cities, there are skilled work­ers and not-soskilled work­ers. They need to be in har­mony.”

Bischoff first vis­ited China in 1973, stop­ping off in the cities of Bei­jing, Shang­hai, Tian­jin and Guangzhou, as well as Shan­dong prov­ince. He re­mem­bers the coun­try as “very prim­i­tive” then, and said it has since changed be­yond recog­ni­tion.

“For ex­am­ple, (one morn­ing) we were given fried eggs for break­fast,” he re­called. “Our hosts had made them the night be­fore and put them in the fridge. They wanted to please us, but icecold fried eggs are not very nice. Nowa­days, in Chi­nese ho­tels, you can get the most won­der­ful Western or Chi­nese food. (The coun­try) has opened up.”

Born in Aachen, Ger­many, in 1941, Bischoff was ed­u­cated in Cologne and Dus­sel­dorf be­fore grad­u­at­ing from the Univer­sity of Wit­wa­ter­srand in Jo­han­nes­burg in 1961 with a de­gree in com­merce.

He started his ca­reer in the in­ter­na­tional depart­ment of Chase Man­hat­tan Bank and, in 1966, joined the Bri­tish as­set man­age­ment com­pany J. Henry Schroder & Co. It was this job that led him to Asia.

He said he was asked to go to Hong Kong to launch the com­pany’s mer­chant bank­ing divi­sion, and at first he was hes­i­tant. “I said I didn’t want to do that be­cause I was trav­el­ing ev­ery se­cond week to the US for my law school stud­ies.”

What changed his mind was a book, The Year 2000 by Kahn Her­man and An­thony J. Wiener, pub­lished in 1968, which he re­ceived from a col­league. Kahn founded the Hud­son In­sti­tute and was one of the pre­em­i­nent fu­tur­ists of the lat­ter part of the 20th cen­tury.

“The book put for­ward the idea that Ja­pan would grow so fast that it would over­take the US in per capita GDP, and that the cen­trifu­gal ef­fect Ja­pan would have on other coun­tries like Malaysia, In­done­sia and Sin­ga­pore would be sig­nif­i­cant. I got to page 65 and then agreed to go (to Asia). It was the right thing to do.”

Look­ing back, Bischoff said Hong Kong was the “great­est place” for peo­ple of his gen­er­a­tion. He en­joyed ex­plor­ing Asia dur­ing those years, as he found it to be di­verse in terms of eth­nic­ity, re­li­gion and ge­og­ra­phy.

He even­tu­ally be­came man­ag­ing di­rec­tor of Schroders Asia Ltd, based in Hong Kong, and was ap­pointed group chief ex­ec­u­tive of Schroders Plc in 1984 and then chair­man in 1995.

He cred­its Hong Kong with play­ing an im­por­tant role in his ca­reer and be­lieves the city and the Chi­nese main­land are ir­re­vo­ca­bly linked.

“I’ve been to China many times, and I think Hong Kong would not ( be so im­por­tant) if it were not use­ful to the main­land,” he said. “The Hong Kong econ­omy grew sub­stan­tially be­tween 1970 and 1982, but not in a straight, un­in­ter­rupted line. That re­sulted — in 1973 and 1974, for ex­am­ple — in pe­ri­ods of no growth.

“The ex­pe­ri­ence of grow­ing a busi­ness dur­ing ups and downs stood me in good stead later in life.”

Con­tatct the writer at ce­cily.liu@mail. chi­nadai­lyuk.com

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