China Has No Choice In Post Crisis Era

Asia successfully passed the global crisis of 2008-09.

For the past 3 years, Morgan Stanley (Morgan

Stanley) president of Asian business, I have the privilege of witnessing Asia's remarkable adaptability.

At the moment I am about to return to the United States, I feel that three lessons are very noticeable.

First, Asia has learned from the painful lessons of the 1997-98 year regional crisis.

The crisis was mainly due to the vulnerability of Asia to changes in international capital flows.

Asian countries are short of foreign exchange reserves, short term external debt and rigid exchange rate pegging system, so there is hardly any chance of escape when hot money starts to escape.

When Thailand collapsed, Indonesia, South Korea, Taiwan and most other parts of developing Asia quickly plunged into crisis.

In contrast, the recent crisis in Asia is mainly an external demand shock.

In 2009, global merchandise trade has slid 11.8%, which has severely hit the export led region.

All parts of Asia have been spared or plunged into severe recession, such as Japan, Taiwan, Malaysia and Thailand, or the economy has slump, such as China, India and South Korea.

But the accumulation of foreign exchange reserves in Asia during the two crisis - from less than $1 trillion in 1998 to nearly $5 trillion in 2009 - saved it from financial turmoil after the bankruptcy of Lehman brothers (Lehman).

Secondly, there are Chinese factors.

My footprint throughout Asia will never mistake the new features of Asia as the core of China.

I remember that after the Asian crisis, I wrote an article in the financial times that China will take the place of Japan and become the leader of regional growth.

Most people are skeptical about this. Even I myself admit that the speed of conversion is faster than I expected.

But China has clearly become the leading economic force in Asia.

Over the past 10 years, export oriented economies like Japan, Korea and Taiwan have all adjusted their export direction: their largest export market used to be the United States; now it is the mainland of China.

As a result, the "Asian dream" is more like the "Chinese dream" now.

This is undoubtedly evident in Hongkong, which has returned to China for nearly 13 years, but I have seen this again in business pactions throughout Asia.

This puts Asia in a dangerous situation - increasingly dependent on China's sustainable growth and prosperity.

But the challenges facing China can not be underestimated. The recent real estate and credit bubble and the labour pressure reflected in the Foxconn factory in Shenzhen have highlighted this point.

But just as administrative surgery measures seem to inhibit the risk of bubbles, the rapid growth of productivity should offset the effect of the minimum wage increase and keep unit labor costs under control.

This is not to reduce China's most arduous structural requirements - the demand for stimulating private consumption is becoming more and more urgent.

I hope that in China's "12th Five-Year" (2011-16 year) plan, China will be able to realize the pformation conducive to consumption so as to meet this structural requirement.

This will in turn provide support for East Asian suppliers such as Korea, Japan and Taiwan.

However, if this pformation can not be promoted, the growth of China's growth momentum will be weakened by the swirling crisis in the West.

At that time, the rest of Asia, which is at the core of China, may be in trouble.

Third, Asia can not simply assume that it has survived the global crisis, assuming that it has discovered the only way to achieve economic prosperity.

In an increasingly complex and integrated world, the evolution of the dilemma is unpredictable.

In 2008-09, the spread of the crisis across products is quite different from the 1997-98 years of cross-border spread.

Asia must be prepared for the inevitable next crisis rather than intoxicated by new discoveries of adaptability.

At this point, Asia needs to do much more.

In the late 90s, exports accounted for about 35% of GDP in developing Asia.

10 years later, this proportion rose to 45%.

Just as the aftershocks of the 2008-09 crisis may have a long-term impact on demand in the US and Europe, Asia has become more dependent on external demand.

Against this background, the key is that Asia should adapt once again to the more dependent on its internal market.

What Asia must do now after the crisis is to stimulate private consumption, which is totally different from the demand for restoring financial fragility after the crisis in the late 90s.

I am optimistic about Asia, which will be even better in the next 3 years than in my recent post in the region.

I think China must have understood that China has no choice but to pform its 1 billion 300 million consumers into the main source of internal growth in the post crisis era.

But when I left Asia, I was very worried that the rest of the world did not understand this.

I am particularly concerned about the continuing debate in the US against China - especially in the mid-term elections in the United States.

I fear that the huge multilateral trade deficit caused by an unprecedented shortage of domestic savings will prompt the us to make a big mistake by seeking trade sanctions against China and seeking bilateral "therapy" to promote employment.

The United States is more than ever necessary to stop blaming its own frustrations on others.

It should reflect on itself and realize that it is a bitter pill to bear.

This is a request for re education in the United States. I went to Yale University (Yale).

University) the main reason for teaching.

The writer is chairman of Morgan Stanley Asia and has a book entitled "The Next Asia" in Stanley.

He will teach at Yale University in July 1st.