Byron Wien, vice-chairman of Blackstone Advisory Partners, swung by Hong Kong this week to share his outlook for the world economy with investors in the city.
His general message, laid out in his latest market commentary, is that a more difficult 2014 lies ahead thanks to continued weak economic growth in the US and Europe, combined with China’s slower expansion.
In an interview with FinanceAsia on Tuesday, the day that China’s leaders emerged from their closed-door third plenary session, Wien expounded on the problems on the mainland. “People are worried that China hasn’t made the reforms that everybody expected,” he said.
The centrepiece of those reforms, laid out in the 2010 five-year plan, targets a rebalancing of the Chinese economy, from one which comprises 45% investment and 35% consumption to one in which those numbers are reversed — back to the where it was in 1999.
“If they do that, the worry is that growth will slow to a level where they don’t create the jobs that they feel they need to sustain the authoritarian government,” said Wien. “They’re torn: they want to rebalance the economy in favour of the consumer but at the same time they want to maintain growth in the 7%-plus annual range.”
It is a thorny problem. Wien acknowledges that China’s unique form of government was essential to its economic transformation from a near-feudal existence in 1976, when Mao died, to the second-biggest economy in the world today. “You couldn’t have done that, I don’t think, with any form of government other than the one they had,” he said.
Even so, Wien still considers China’s 7% growth an attractive investment for 2014, despite its reform dilemma, and says that emerging markets in general could be set for a better performance in 2014 given reasonable valuations and growing company profits.
