Source : Straits Times - 6 Sep 2008
US growth to remain stagnant while China’s is not sustainable, say seminar speakers
GLOOM was the order of the day at the annual CapitaLand International Forum yesterday.
Most of the invited speakers - ranging from Goldman Sachs managing director Michael Buchanan to Ms Gail Fosler, president of United States research organisation Conference Board - shared a largely bleak outlook for the global economy.
Ms Fosler kicked off the seminar by saying that while the US economy is not in a recession, it will remain stagnant for the coming period. ‘This is a period of rolling adjustments, that goes from sector to sector, that will keep the US growth rate low in the 1 to 2 per cent range for the foreseeable future,’ she said.
The seminar was attended by more than 350 CapitaLand business associates, board members and staff, as well as corporate bigwigs such as Temasek Holdings chairman S. Dhanabalan and CapitaLand International Advisory Panel chairman Philip Yeo.
‘For those of you who follow the US economy, you realise that 1 to 2 per cent in a US context feels like a recession, even if it’s not technically a recession.’
But it is not only the US that is in trouble. ‘Signals of a global slowdown are intensifying,’ she added. ‘In China, we’re seeing one of the most severe signs of slowdown since the Asian financial crisis.
‘Country by country, people are going to take a more sober view of the economic situation.’
Giving a more in-depth look on the Chinese situation was Professor Shawn Xu Xiaonian, who teaches economics and finance at the China Europe International Business School.
He said China needs to transform its economy through structural changes, as the traditional growth model is not viable any more.
China’s strength is built on being a low-cost supplier, but high inflation is quickly eroding this advantage and making it difficult for the country to adapt to the changing environment, explained Prof Xu.
China’s current growth is also too energy-consuming to be sustainable, he added. ‘We consume so much energy it’s no surprise oil prices jumped to more than US$100 a barrel,’ he said to laughter from the audience.
Finally, Mr Buchanan, who is also Goldman Sachs’ chief economist for Asia excluding Japan, wrapped things up by echoing Ms Fosler’s view.
‘We’ve had a quarter-century of declining inflation and interest rates; that’s been good for almost every asset class,’ he said.
‘It’s not necessarily a reversal now, but it’s not going to continue like it used to be. It’s not just a short-term blip and everything is going to go back to normal.’
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