China must speed up reform, says Goldman’s Ha

06 August 2014   Category: News, Asia, China, Global, USA   By Hui Ching-hoo

Renowned investment strategist Dr. Jiming Ha has urged the Chinese government to step up multiple reforms on state-owned enterprises (SOEs), land, and capital markets in order to sustain growth in the long run.

Speaking at the CFA Institute’s ‘China Investment Conference: Rise of the Hedge Fund Industry’ in Shanghai on August 2, the Goldman Sachs investment strategy group vice chairman and chief investment strategist, China, said the potency of economic stimuli adopted by Beijing during previous market downturns has dwindled.

Dr. Ha called on the government to press ahead with structural reforms going forward: “Over the past decades, China has long relied on demographic and reform dividends to grow its economy, but the former will precipitate into deficit in the longer term.”

Dr. Ha said that the reform packages introduced in the third plenary meeting last year were encouraging.

“The Chinese government focussed on short-term growth in the first half due to the economic slowdown. However, when the economic growth has stabilised with economic stimulus measures, we will see a rebalance between short-term growth and long-term reform in the second half that more important reforms will be introduced.”

He anticipated that regulators would bring in a number of reforms such as interest rate liberalisation, exchange rate flexibility, private participation of SOEs, as well as land reform going forward. These could significantly help to create local wealth to sustain long-term growth. 

Dr. Ha, however, forecast that the country’s average GDP growth would inevitably taper off in the next decade, down to slightly above 5%, because of the unsustainable growth of export and consumption.     

Separately, Dr. Ha predicted that the US Federal Reserve would not revise interest rates until the second half of 2015. While the rate hike is likely to cause upward pressure to mortgage rates in Asian countries including China, the overall long-term impact to Mainland economy is marginal, he said.