The Davos economic forum is held every winter in the Swiss Alps, I have just found out about the summer one which is held in China.
The biggest surprise at this week’s Dalian forum was the East-West divergence of opinion on the economic outlook, both in the months ahead and in the very long term. Western economists mostly believe that developing countries in general, and China in particular, are threatened by serious financial crises as U.S. monetary policy begins to be tightened, probably as soon as the Federal Reserve Board’s meeting next week. The consensus view is that emerging economies have invested and borrowed too much, taking advantage of the Fed’s easy money and will now face painful de-leveraging similar to what Europe and the U.S. experienced five years ago. This de-leveraging means, in turn, that the glory days for developing economies are probably over, and most of these countries, perhaps including China, may never escape the “middle-income trap” that has prevented further progress in many developing economies.
Surprisingly, however, the Chinese economists in Shenzhen seemed largely unperturbed by the Western warnings, preferring to concentrate on environmental, governance and public health issues and the details of financial market design. In Dalian, too, the sense of financial foreboding was strangely absent, as speakers from other developing countries agreed with their Chinese colleagues that higher priorities than debt management were structural issues such as demographics and education, governance and corruption, bank regulation and competition, energy and urban design.
If China can manage and control its way to ever-greater prosperity, despite the sudden outbreak of skepticism among Western analysts, the same will probably be true of many other emerging economies, which increasingly look to China, instead of the West, for support and guidance.