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This session will examine the impact of the crisis on China, the likely projection of its recovery and the role for the private sector.[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Michael%20Pettis%22%2C%22job_role%22%3A%22Professor%20of%20Finance%2C%20Guanghua%20School%20of%20Management%2C%20Peking%20University%3B%20Senior%20Fellow%2C%20Carnegie-Tsinghua%20Center%20for%20Global%20Policy%20(China)%22%2C%22content%22%3A%22Michael%20Pettis%20is%20a%20nonresident%20senior%20fellow%20in%20the%20Carnegie%E2%80%93Tsinghua%20Center%20for%20Global%20Policy.%20An%20expert%20on%20China%E2%80%99s%20economy%2C%20Pettis%20is%20professor%20of%20finance%20at%20Peking%20University%E2%80%99s%20Guanghua%20School%20of%20Management%2C%20where%20he%20specializes%20in%20Chinese%20financial%20markets.%20%5CnFrom%202002%20to%202004%2C%20he%20also%20taught%20at%20Tsinghua%20University%E2%80%99s%20School%20of%20Economics%20and%20Management%20and%2C%20from%201992%20to%202001%2C%20at%20Columbia%20University%E2%80%99s%20Graduate%20School%20of%20Business.%20He%20is%20a%20member%20of%20the%20Institute%20of%20Latin%20American%20Studies%20Advisory%20Board%20at%20Columbia%20University%20as%20well%20as%20the%20Dean%E2%80%99s%20Advisory%20Board%20at%20the%20School%20of%20Public%20and%20International%20Affairs.%5CnPettis%20worked%20on%20Wall%20Street%20in%20trading%2C%20capital%20markets%2C%20and%20corporate%20finance%20since%201987%2C%20when%20he%20joined%20the%20sovereign%20debt%20trading%20team%20at%20Manufacturers%20Hanover%20(now%20JPMorgan).%20Most%20recently%2C%20from%201996%20to%202001%2C%20Pettis%20worked%20at%20Bear%20Stearns%2C%20where%20he%20was%20managing%20director%20principal%20heading%20the%20Latin%20American%20capital%20markets%20and%20the%20liability%20management%20groups.%20He%20has%20also%20worked%20as%20a%20partner%20in%20a%20merchant-banking%20boutique%20that%20specialized%20in%20securitizing%20Latin%20American%20assets%20and%20at%20Credit%20Suisse%20First%20Boston%2C%20where%20he%20headed%20the%20emerging%20markets%20trading%20team.%5CnIn%20addition%20to%20trading%20and%20capital%20markets%2C%20Pettis%20has%20been%20involved%20in%20sovereign%20advisory%20work%2C%20including%20for%20the%20Mexican%20government%20on%20the%20privatization%20of%20its%20banking%20system%2C%20the%20Republic%20of%20Macedonia%20on%20the%20restructuring%20of%20its%20international%20bank%20debt%2C%20and%20the%20South%20Korean%20Ministry%20of%20Finance%20on%20the%20restructuring%20of%20the%20country%E2%80%99s%20commercial%20bank%20debt.%5CnHe%20formerly%20served%20as%20a%20member%20of%20the%20Board%20of%20Directors%20of%20ABC-CA%20Fund%20Management%20Company%2C%20a%20Sino%E2%80%93French%20joint%20venture%20based%20in%20Shanghai.%20He%20is%20the%20author%20of%20several%20books%2C%20including%20The%20Great%20Rebalancing%3A%20Trade%2C%20Conflict%2C%20and%20the%20Perilous%20Road%20Ahead%20for%20the%20World%20Economy%20(Princeton%20University%20Press%2C%202013).%22%2C%22image%22%3A%2231909%22%2C%22linkedin%22%3A%22%22%7D%5D” title=”Speaker” el_class=””][vc_quotes layout=”accordion” 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title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
COVID-19 has accelerated issues that already existed in China.
Some fear China’s significantly rising debt levels. Other worry more about the political implications of a rapid slowdown in growth. The latter group won the debate and settled on 6 per cent GDP growth for 2020. However, COVID-19 has derailed this.
Western economists don’t understand what GDP means in the Chinese context because China has a different accounting treatment of GDP. China’s publicly released numbers don’t include a GDP write down for bad investments.
Chinese growth is challenged because of high unemployment (around 20 per cent), a shift from consumption to saving and a lack of business investment.
If monetary policy can’t accommodate a significant increase in debt, enormous disruptions will impact the Chinese economy.
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Poll results
In 10 years time will your geographic investment allocation to China be:[vc_line_chart x_values=”” values=”%5B%7B%22title%22%3A%220-5%25%20(21%25)%22%2C%22y_values%22%3A%2221%22%2C%22color%22%3A%22blue%22%7D%2C%7B%22title%22%3A%225-10%25%20(26%25)%22%2C%22y_values%22%3A%2226%22%2C%22color%22%3A%22pink%22%7D%2C%7B%22title%22%3A%2210-15%25%20(33%25)%22%2C%22y_values%22%3A%2233%22%2C%22color%22%3A%22orange%22%2C%22custom_color%22%3A%22%235aa1e3%22%7D%2C%7B%22title%22%3A%2215-20%25%20(16%25)%22%2C%22y_values%22%3A%2216%22%2C%22color%22%3A%22turquoise%22%2C%22custom_color%22%3A%22%23ff675b%22%7D%2C%7B%22title%22%3A%2220%2B%25%20(5%25)%22%2C%22y_values%22%3A%225%22%2C%22color%22%3A%22mulled-wine%22%2C%22custom_color%22%3A%22%2350485b%22%7D%5D”]
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
Even if the United States turns a blind eye to deglobalization’s effects on the rest of the world, it should remember that the current abundant demand for dollar assets depends heavily on the vast trade and financial system that some American politicians aim to shrink. If deglobalization goes too far, no country will be spared.
The decade ahead promises to be one in which purpose gets to be much more widely entrenched and influential. And asset owners have a role to play in the path to purposeful capitalism.
Rebecca Henderson, the John and Natty McArthur University Professor at Harvard University who co-teaches Reimagining Capitalism at HBS, says inequality is equal to climate risk in its potential impact. She told delegates at the Fiduciary Investors Symposium at Harvard University when a system no longer generates freedom and prosperity it must be changed. Change is possible because we have the resources and technology to do it. A first move is decent jobs for people at the “bottom”.
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