International Law

China's Economic Future. By The Numbers.

By Dan

I tend to put very little stock in economist's predictions and I tend to put even less stock in economist's predictions on China (and even less still on non-economists prognosticating on China's economy as though their doing business there all of a sudden makes them an economist). Though I find the predictions to be of only very limited value, I do often find the assumptions on which the predictions are based to be intriguing and sometimes even worthwhile.

That is how I feel about a recently released Morgan Stanley report, summarized in this Beyond Brics post, entitled, "China 'Negatrends': How to Get Wxposure to China's Growth." The post is ostensibly about the stocks in which you should be investing to take advantage of China's growth, but it also delves in to what Morgan Stanley has to say about the China trends that will be shaping China's economic future:

The trends set to reshape China over the next decade are demographics, urbanisation, infrastructure, social security network, education, and consumer financing. But this is not new. There are, for example, plenty of companies clamouring to tap China's growing consumer market, but that doesn't make them likely to succeed.

i agree there is nothing new here, but that is because these trends are so apparent and, to a very large extent, so uncontroversial.  

But the part of the Morgan Stanley report I found most intriguing was its almost over the top predictions on what will happen by way of wages, consumption and foreign investment in China over the next ten years:

Morgan Stanley's optimism about the mega-trends is based on the assumption that three factors will change the economy over the next decade: that real wages will quadruple, consumption in total numbers will triple, and foreign investment will double.

The funniest thing is that I think Morgan Stanley might end up being right.  

What do you think? 

Full post as published by China Law Blog on November 20, 2010 (boomark / email).