China’s economic success has led to some rather unusual disruptions to the usual battlelines over free-market versus state-sponsored capitalism. Western countries that have traditionally been staunch defenders of the free-market variety have been shifting towards statism, even as China continues its historical trend toward a more market-oriented brand of capitalism. Alexander Friedman, Global Chief Investment Officer for UBS Wealth Management, looks at the risks for both China and the West in this strange new pas de deux.

It is all too easy to envy China. At current growth rates, the Chinese economy will double in size in only nine years, raising an estimated 100 million people above the poverty line in the process.

Compare this to the major economies of the Western world. The eurozone’s GDP remains mired below 2008 levels, and the US last enjoyed Chinese-style growth back in 1984, when gasoline was US$1.10 a gallon and the first Apple Macintosh was rolling off the production line in California.

Given the West’s anemic performance in recent years, it is hardly surprising that envy of China’s economic dynamism has manifested itself in official policy. Recent examples range from direct market interventions (such as America’s effort to boost its automotive industry via the ‘cash for clunkers’ programme), to the British government’s attempt to reflate the UK’s housing market by guaranteeing mortgages under its ‘help to buy’ scheme.

Even hitherto independent central banks have not escaped the creep toward state-sponsored capitalism. The US Federal Reserve has been gently encouraged to buy 90% of annual net issuance of US Treasury bills, effectively funding the US fiscal deficit and ensuring, via the resulting negative real interest rates, that businesses and individuals wishing to save, rather than spend, will lose purchasing power by doing so.

Ironically, Western countries are shifting to statism at the very moment that China appears to be heading in the opposite direction – witness its recent moves to liberalise its financial system. In just 10 years, the share of state-directed bank lending in China has fallen from 92% of new credit creation to less than half.

But copycat capitalism is not without risk; indeed, it is unlikely to end without someone getting scratched. The West’s efforts to emulate China are hindered by its inability to replicate the conditions of Chinese growth, such as labour mobilisation, and its unwillingness to pursue practices such as the one-child policy. Thus, the West’s forays into state capitalism are more likely to result in the misallocation of capital, more in the vein of China’s vastly oversupplied steel industry but without the stellar headline economic performance of the national economy.

Coming from the other direction, China’s crawl toward a more market-oriented brand of capitalism also has potential pitfalls. We need look no further than its recent problems with so-called wealth- management products (WMPs) for evidence that reform intentions without adequate regulatory institutions can cause problems.

WMPs were commonly marketed to individuals as alternatives to deposit accounts. But the funds contributed were then invested in riskier assets that included ‘trust loans’ to companies such as property developers. The number of trust loans rose by 40% in 2012, which triggered serious concern among China’s authorities that WMPs could become the next financial WMDs [weapons of mass destruction], because banks had strong incentives to make uneconomic lending decisions.

The subsequent state-directed WMP regulation put a brake on credit creation and sent Chinese stock markets plunging. Ultimately, however, the measures should enable China’s shadow banking system to continue to grow at a more manageable pace and in a more sustainable way.

There is a risk that the lack of growth in the West may make economic transformation in the direction of the Chinese model appear more urgent to its governments. But the Western economic model has brought about unprecedented standards of living. This achievement should not be dismissed because of one crisis, no matter how prolonged, and the economic model that produced today’s living standards should not be cast aside without careful consideration.

By contrast, China’s rapid growth should not obscure its need for economic change. According to the International Monetary Fund, at some point between 2020 and 2025, China will pass what economists call the ‘Lewis turning point’, at which a country’s vast supply of low-cost workers is exhausted and factors such as labour mobilisation provide a diminishing contribution to growth. With smaller demographic and resource advantages in the coming years, the consequences of capital misallocation, unavoidable under a state-directed economic model, will come to the fore.

As China’s recent experience with WMPs demonstrates, economic change can expose old problems and create new ones. Ironically, China’s transformation from a state-directed to a market-driven economy may require the greatest amount of planning of all.

Alexander Friedman

Global Chief Investment Officer, UBS Wealth Management

Copyright: Project Syndicate, 2013.


中國的經濟成就,有點不尋常地擾亂了自由市場與國家資本主義之間向來的敵對狀態。 傳統以來堅決捍衛自由市場的西方國家,逐漸向中央集權經濟統制轉化;而中國則繼 續隨歷史趨勢發展,邁向較為市場導向的資本主義。UBS財富管理公司全球首席投資官 Alexander Friedman探討中國和西方國家在這場奇妙的新編雙人舞中面對的風險。

苏黎世—中国太招人嫉妒了。按照 目前的增长率,中国经济只消九 年就能翻番,让大约1亿人脱离贫困 状态。

再来看看西方世界主要经济体。欧元 区國內生產總值仍在2008年水平之下 苦苦挣扎,而美国最後一次經歷中国 式增长已要追溯到1984年汽油价格1.10 美元/加仑、第一台苹果Macintosh电脑 从加州生产线下线的时候。

近几年来,西方表现平平,因此对中 国经济活力的羨慕体现于官方政策 中,自然不足為奇。最新的例子包 括直接市场干预(比如美国试图通 过“旧车换现金”项目提振汽车工 业)、英国政府以“助买”制度為按 揭提供擔保,試圖从而提振英国房地 产市场等。

就连此前一直保持独立的中央银行也 无法脱離迈向国家资本主义的趨勢。 美國溫和地鼓励聯邦儲備局购买佔年 淨發行量90%的美国国债,使聯儲局 實際上補貼了美国的财政赤字;由此 产生的负实际利率,让意欲存钱而不 是花钱的企业和个人因为储蓄而丧失 购买力。

讽刺的是,在西方国家邁向中央集权 經濟統制的同时,中国却在向相反的 方向前进——其最近金融体系自由化 的动作就是明证。在短短十年间,中国的国家指导银行贷款占新增信用创 造比从92%降到了一半以下。

但模仿的资本主义并不是没有风险 的,最后总有人要受到损失。西方模 仿中国的障碍在于它无法复制中国增 长的条件(比如劳动力动员能力), 也不願贯彻某些措施(比如计划生 育)。因此,西方突然转向国家资本 主义更可能导致资本的错误配置,重 蹈中国钢铁工业供给大量过剩的覆 辙,卻又不像中國那樣有著耀眼的国 民经济表现。

另一方面,中国向市场导向的资本主 义逐渐迈进的過程,也有潜在陷阱。 只消看看其最近爆出的所谓理财产品 问题,就可以清楚地看到,空有改革 意圖而沒有適當的监管制度配合,会 产生大问题。

理财产品通常作为储蓄存款的替代品而 向个人销售,但由此集中起来的资金, 卻投资于高风险资产,包括流向房地 产开发商等公司的“信托贷款”。2012 年,信托贷款数量增加了40%,引起了 中国当局對于理财产品可能成为下一个 金融“大规模杀伤性武器”的严重担 忧,因为银行有很大的誘因做出不符合 经济原則的贷款决策。

其後国家指導的理财产品监管给信用 创造踩了一脚急刹车,也让中国股市 暴跌。但是,这些措施最終可以让中国的影子银行系统以可駕馭的速度实 现更加可持续的增长。

西方的經濟發展有一个风险,就是增 长不振的情況可能让西方國家的政府 認為有迫切需要朝著中国经济模式的 方向轉化。但西方经济模式造就了前 所未有的高生活水平,这成就不能因 为一场危机而抹杀,不管这场危机维 持多久;造就如今生活水平的經濟模 式,不应不假思索地棄如敝屣。

相反,中国的快速增长也不应掩蓋经 济转型的需要。据國際貨幣基金組織 预测,2020—2025年间,中国将越过经 济学上的“刘易斯拐点”,庞大的低 成本勞動力供應耗盡,劳动力动员等 因素对增长的贡献将走上下坡路。随 着未来几年人口和资源优势的減退, 国家导向经济模式不可避免地造成的 资本配置不当的后果将显现出来。

中国最近的理财产品问题表明,经济 变革会暴露舊问题、创造新问题。讽 刺的是,中国从国家导向經濟向市场 经济的转型,或许正需要最大规模的 计划。

亚历山大·弗里德曼 (Alexander Friedman)


Copyright: Project Syndicate, 2013.