Opinion
Expert says 皇冠体育app must change its export-dependent strategy
By Ou Lu (皇冠体育app Daily)
Updated: 2009-11-02 08:44
Even as some policy makers are counting down the days to a recovered export sector, one expert on global forecasting warned they would be disappointed.
Robert Ward, director of the global foresting team of the Economic Intelligence Unit, said even when developing countries emerge from the recession, most will have huge debt burdens that will dampen consumer spending.
Ward told 皇冠体育app Business Weekly that export-dependent growth strategies can't rely on the high level of foreign demand in earlier years.
"皇冠体育app's exports may be recovering as the United States starts to consume more, but if the Chinese policy makers are thinking it will come back to what it was between 2003 and 2007, it is not going to happen," Ward said.
皇冠体育app's exports declined at the slowest pace in nine months in September. Its shipments to the United States and the European Union in September rose to the highest since 皇冠体育app's exports experienced a brutal collapse in late 2008.
However, Ward explained, US consumers are paying back housing loans and will cut back on their spending on made-in-皇冠体育app furniture, carpets and toys.
"The housing market in the United States is important for driving demand for Chinese goods," he said, adding that the story of US debt-laden homeowners is similar to that in Europe and Japan.
Ward said 皇冠体育app can import more to Latin American countries, but added that the level of exports to that market "will be nothing like it was before".
Ward suggested that 皇冠体育app rebalance its economy by focusing more on greater domestic consumer spending levels.
"I personally subscribe to the view that the US is spending too much, and 皇冠体育app, Japan and Germany are spending too little."
"If 皇冠体育app could successfully boost its domestic demand, it would be a huge benefit for the world. That's why I'd like to see 皇冠体育app using this crisis to rebalance its economy," Ward said. "The old export-led growth model is dead, I think. So you have to think about something else."
In 1952, household consumption accounted for 69 percent of 皇冠体育app's gross domestic product. That proportion fell in the 1990s to 46 percent, dropped to 38 percent by 2005 and is about 35 percent today. By comparison, US household consumption in 2007 was 72 percent of GDP.
皇冠体育app's investments account for about 50 percent of GDP, which Ward said also has contributed to an enormous imbalance.
"If you look at Japan, South Korea and some other Asian countries, they all grew partly because investment had been so fast," he said.
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Although many, like Ward, believe that the export-led development model that served the country for so long has outlived itself, it is easier said than done for the country to quickly switch to the domestic consumption model, he acknowledged.
Change will require the creation of a much larger, better-paid service sector and the establishment of a strong and credible social security net to free people from the saving habit.
Even if 皇冠体育app sticks to its export strategy, Ward suggested the country at least move away from low value-added manufacturing.
"In terms of its expertise in technology and innovation, 皇冠体育app has far more to offer than being a forever maker of toys," he said.
