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