As an addendum to my column in the May 11 JoC exploring the critical question of whether China will maintain its market share as a source of U.S. containerized imports as the world climbs out of recession, I heard after deadline from one of the most insightful commentators on China today, Stephen Roach, chairman of Morgan Stanley Asia. Roach has been critical of China recently, arguing that the nation is plowing too much money into infrastructure investment designed to support its export sector while neglecting the development of a social safety net that will encourage consumer spending. He believes that unlike the Asian flu of the late 1990s and the post-Sept. 11, recession, both of which China came barnstorming out of, this time will be different, in large part because the U.S. consumer can no longer be relied upon as the engine of global growth as it had in the run-up to the current recession.
But on the question of China’s market share in outsourced manufacturing, Roach believes China’s current policies will help it maintain and even grow its share. Here is what he said in response to an inquiry from the JoC: “I continue to expect China's share of global manufacturing to increase over the next five years -- albeit at a somewhat slower pace. This moderating trend reflects a likely leveling off of the export share of Chinese GDP, which has soared from 20% in 2001 to 36% in 2007. China's rebalancing imperatives -- shifting growth always from exports and investment, toward internal private consumption, should be key in leading to an eventual dampening of China's global export surge.”
The conclusion from Roach and others is this: upstart developing nations such as Vietnam and India will surely grow, but not at the expense of China.