New York-based fi­nan­cial ex­pert Ruchir Sharma praises China’s Belt and Road Ini­tia­tive in his lat­est book, An­drew Moody re­ports.

China Daily (Hong Kong) - - BOOKS | LIFE -

Ruchir Sharma in­sists he likes to write for the in­tel­li­gent, in­formed reader who wants to know how the real world works.

The chief global strate­gist at US com­pany Mor­gan Stan­ley In­vest­ment Man­age­ment cer­tainly has no short­age of read­ers.

His lat­est book, The Rise and Fall of Na­tions: Forces of Change in a Post-Cri­sis World, is al­ready a New York Times in­ter­na­tional best-seller.

“Books about global macro eco­nomics and po­lit­i­cal ideas are of­ten typ­i­cally writ­ten by aca­demics and have zero prac­ti­cal value,” says Sharma.

“They of­ten have th­ese long time hori­zons and don’t look at what the world is go­ing to look like in the next five or 10 years, which I think most peo­ple are con­cerned with.”

Sharma, also a reg­u­lar con­trib­u­tor to The Wall Street Jour­nal and Wash­ing­ton Post and who was speak­ing from his home in New York, is some­thing of a celebrity eco­nomic guru.

His first book, Break­out Na­tions: In Pur­suit of the Next Eco­nomic Mir­a­cles, also a best-seller, firmly pricked the hype bub­ble sur­round­ing emerg­ing na­tions while be­ing op­ti­mistic about China’s abil­ity to break out of the so-called mid­dle-in­come trap.

In his new book, which was re­leased in June, the world’s sec­ond-largest econ­omy mostly fares well too on the 10 cri­te­ria he sets out to judge a coun­try’s per­for­mance.

Th­ese are: De­mo­graph­ics; whether a coun­try is ready to em­brace re­form; wealth in­equal­ity; the role of govern­ment in the econ­omy; whether a coun­try is cap­i­tal­iz­ing on its lo­ca­tion (its “ge­o­graphic sweetspot”); man­u­fac­tur­ing in­vest­ment; in­fla­tion; whether its cur­rency is over- or un­der-val­ued; the level of debt and the hype fac­tor (how the coun­try is por­trayed by global opin­ion mak­ers).

“Not all of them are orig­i­nal to me,” says Sharma. “There is a body of work done on things like low in­fla­tion or high in­vest­ment. It has just not all been strung to­gether in this for­mat and that is what I have tried to do here.”

He deals with wealth in­equal­ity with a chap­ter en­ti­tled, “Good bil­lion­aires, bad bil­lion­aires” and he be­lieves on this cri­te­rion China has ben­e­fited from many of its wealthy ty­coons such as Al­ibaba’s Jack Ma play­ing an in­flu­en­tial role in the econ­omy. He points out

chief global strate­gist at Mor­gan Stan­ley In­vest­ment Man­age­ment, ex­am­ines in his new book (be­low) the im­pact of 10 cri­te­ria on eco­nomic de­vel­op­ment.

that the top 10 Chi­nese en­trepreneurs con­trol just 1 per­cent of GDP in China, com­pared with 12 per­cent in In­dia.

“The share of bil­lion­aires in the (Chi­nese) econ­omy is at a man­age­able level. It’s not like Rus­sia, In­dia or Mex­ico where the share of wealth be­comes just too large and sows the seeds of po­lit­i­cal re­sent­ment,” he says.

Sharma, 42, says the way the govern­ment has re­treated from many parts of the econ­omy over the past 30 years has also been of ben­e­fit to China.

“It be­gan from be­ing a very big ob­tru­sive, all-con­trol­ling state to one which has sys­tem­at­i­cally re­duced its share (in the econ­omy) over time and that has done very well for China.”

Sharma also says with re­cent moves like the Belt and Road Ini­tia­tive, the govern­ment has tack­led the prob­lem that the coun­try’s west is not in a “ge­o­graphic sweetspot” as a re­sult of be­ing land­locked.

“With the whole Silk Road project, China has made use of its ge­og­ra­phy. China has re­ally been very good about open­ing up its bor­ders com­pared with other coun­tries in the re­gion such as In­dia.”

Sharma, who grew up in In­dia but moved to the United States in 2002 and has built a ca­reer as an in­flu­en­tial com­men­ta­tor, says some of the rhetoric that has come out of TheRise­andFallofNa­tions

Trump Tow­ers about China does not stand up to scru­tiny, par­tic­u­larly in re­gard to it be­ing a “cur­rency ma­nip­u­la­tor”.

“Any­one who knows the world knows that the Chi­nese cur­rency is ba­si­cally over­val­ued and not un­der­val­ued,” he says.

Sharma says China is a coun­try he has been “com­pletely in awe of ” par­tic­u­larly since it be­came the work­shop of the world in the 1990s.

He ar­gues in the book that by putting “fac­to­ries first” China and Asia have man­aged to build a strong man­u­fac­tur­ing base, which coun­tries, for ex­am­ple, in Latin Amer­ica have failed to do. He also does not be­lieve, as some ar­gue for Africa, that an econ­omy can eas­ily move from agri­cul­ture to ser­vices in one fell swoop.

Although it sounds the­o­ret­i­cally fine, ev­i­dence of it has been miss­ing so far, he says.

“So, for now, I would say fac­to­ries first.”

He be­lieves it is un­re­al­is­tic to ex­pect China to be the con­tin­ual growth en­gine of the world econ­omy with­out ever meet­ing a set­back.

“In the last 100 years, the United States suf­fered from a dozen re­ces­sions and a great de­pres­sion and has still man­aged to be the premier econ­omy in the world. It is per­fectly rea­son­able to ex­pect that China will have down­turns. That’s just the laws of eco­nomic na­ture.”

Sharma con­tends he likes to write for peo­ple who have to make eco­nomic de­ci­sions about their lives today.

“I wish I could have a client to whom I could say, ‘Hey, come and check out my per­for­mance in 20 years from now’ — It just doesn’t work like that,” Sharma says.

Any­one who knows the world knows that the Chi­nese cur­rency is ba­si­cally over­val­ued and not un­der­val­ued.” Ruchir Sharma, au­thor,

Con­tact the writer at an­drew­moody@ chi­nadaily.com.cn

Ruchir Sharma,

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