Please stop panicking, Mr. Soros

By Sumantra Maitra
0 Comment(s)Print E-mail China.org.cn, February 2, 2016
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Here are the changes that we see happening. The Chinese administration is trying to broaden its domestic consumption. The base, while not completely shifting from manufacturing, will start to focus on the service industry. Reliance on exports will be lessened, and imports and domestic markets strengthened. Purchasing power needs to be increased, and structural supply side reforms need to be implemented, and red tape needs to be cut. The real estate bubble which will inevitably come needs to be controlled and contained. There are of course things to worry about. Stocks are volatile and sometimes pumping cash into them might not work. Balancing command structure with the failing performance of any company and production is another key issue. There is always a risk of undervaluation or underperformance of currency in the global market.

However, no economy is without these problems. The biggest problem of the Indian economy is the volatility of investment and the federal bureaucratic culture, where it is extremely difficult to invest. The Indian government cannot control its states and cannot get land for further investment, no matter how much hype is provided by the "Made in India" project, it will never reach the potential of China as a manufacturing giant, because of the unique characteristics of the country. Similarly, China doesn't have subprime debts, unlike Soros's own country.

What China needs to do is diversify. Investment in Africa, the New Silk Route, oil pipelines, and nuclear deals will help that. China also needs to have control of an equity market, which could logically be a source of concern. Since the 1990s, China has lifted millions out of poverty, and had a growth rate which peaked at 10 - 12 percent. No economic model can sustain it. There is currently a slowdown, which was always inevitable, and might even prove favorable. An economic slowdown often stabilizes bubbles and volatility. My advice to Mr. Soros would be not to panic too much.

Sumantra Maitra is a columnist with China.org.cn. For more information please visit:

http://www.china.org.cn/opinion/SumantraMaitra.htm

Opinion articles reflect the views of their authors only, not necessarily those of China.org.cn.

 

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