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Despite Political Brouhaha, China Still Has Economic ‘Firepower’

Chinese policemen on Sept. 24 stand outside the Chengdu Intermediate People’s Court, where Wang Lijun, an ex-police chief who triggered the Chinese Communist party’s biggest scandal in years, awaited his verdict. Photo by Mark Ralston/AFP/Getty Images.

WASHINGTON — For decades, Morgan Stanley’s Stephen Roach has been an oracular economic voice out of China and Asia for readers of the Financial Times and other worthy publications. Now the oracle has come home, teaching at Yale and less frequently quoted in the media. But his views still carry such weight, especially in a city that cannot seem to absorb enough data and speculation about China, that he filled a think tank auditorium in Washington’s Dupont Circle Sept. 27.

In a word, Roach is still bullish on China. And in the most pleasant tones and phrases, he still gets off zingers on those whose China opinions he finds wanting.

Roach told his audience of China watchers and Asian and U.S. journalists that in the next few months, even if the global downturn gets worse, Beijing still has “considerable firepower left” to stimulate its economy.

He also said the country also has “years to come” to run an economy based on investment and improving the output of its hundreds of millions of workers.

Roach praised the Chinese capacity for economic analysis and decision-making, asserting it draws on expertise from universities, think tanks and its own ministries.

“They have really opened up to a brilliant cross section,” he said in his talk at the Carnegie Endowment for International Peace.

One result, as China enters the second year of its 12th and latest five-year plan is the groundwork for a massive shift to private consumption, based on an embryonic service sector supported by higher wages and an expanding social safety net.

Roach was even somewhat upbeat on Chinese efforts at political reform, “but it won’t happen overnight.” He praised the reform efforts of outgoing premier Wen Jiabao, but also linked that stand to Wen’s leadership in ousting the now-disgraced Bo Xilai from the Politburo and efforts to tackle corruption. He added that Chinese leaders are determined not to repeat the mistake the Soviet Union made in attempting political reform ahead of economic reform.

About U.S. political leadership, Roach was far less enthusiastic, describing both President Obama and Republican nominee Mitt Romney as “whiners,” for fixating on Chinese currency manipulation. He said the candidates were pushing the issue “because of bad advice from a think tank up the street,” a reference to the Peterson Institute’s Fred Bergsten, who has made the below-market valuation of the Chinese currency a key talking point.

He warned his listeners to beware of the “psychology of a crescendo of fear-mongering over China,” and made specific reference to Gordon Chang, author of “The Coming Collapse of China”, with whom he recently appeared on Bloomberg Television. He said Chang is “decent and well intentioned” but has never been to China. The book, published a decade ago, “missed 10 years of the most spectacular growth in the history of the world,” said Roach en route to the airport and to an audience wrapping up a week of at least four China conference and preparing for a forthcoming week of several more.

Michael D. Mosettig, PBS NewsHour foreign affairs and defense editor emeritus, will be watching wonks push policy in Washington’s multitude of think tanks. From time to time, he’ll write dispatches on what those scholars and wannabe secretaries of state have in mind for Europe, Asia and Latin America.

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