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SINGAPORE: Massive stimulus measures by world governments have resulted in signs of economic recovery, but sustainability is uncertain.
Chairman of Morgan Stanley Asia Stephen Roach said at a company conference Wednesday that the upcoming challenges will be trade frictions and protectionism, as well as possible disappointing economic growth.
"It won't be as bad as it was late last year, or early this year, but the shift from de-stocking to restocking would have run its course," he said. "I think we'll be then very aware of the weak state of underlying demand in the developed world and the lack of support that provides for what is still an export dependent developing world.
"I don't know if it will be a global double dip, which is what people like to call the relapse scenario, but I think we'll see some disappointments on the growth front that will prove very challenging for financial markets, especially equity markets which are now discounting a very strong global recovery."
Roach said Asia needs to shift from depending on external markets to finding new sources of growth internally, and one such way is to tap on a key asset - the 3.5 billion consumers living in the region.
The chairman said China is expected to transit from an export-led economy to a consumer-based one in about six to seven years.
Currently, internal private consumption only accounts for 45 per cent of Asia's gross domestic product compared to about 70 per cent in the US.
Roach said that despite making up 40 per cent of the world's population, consumers in China and India only spent US$2.5 trillion last year - a quarter of what consumers in the US spent.
"I don't buy this notion for a second that Chinese or Asians in general are programmed at birth to save," he said. "I think the saving occurs in a fairly logical construct that is dominated by income and job insecurity and a lack of a safety net. When you begin to address those issues, I think the response would be surprisingly quick."
Addressing these issues will require China to provide broader support to rural family income, expand social safety net and develop large-scale consumer products and services industries.
- CNA/yb
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