Submitted by Cece Xie, TC ’13
On November 1, TAS was proud to host its first-ever TAS Tea. We invited Stephen Roach, chairman of Morgan Stanley Asia, for an intimate gathering in order to discuss Taiwan, China, and the emerging market in Asia. A highly influential authority on the global financial system, Stephen Roach has immense knowledge of Asia’s economy, with recent emphasis on globalization, the emergence of China, productivity, and the macroeconomic impacts of information technology. He is also currently a Senior Lecturer at the School of Management.
Professor Roach started off with a brief overview of China’s economy in the past thirty years. Three years after the Cultural Revolution ended, in 1979, China’s economy was in shambles. Over the next few years, China pushed for massive reform and change, resulting in a spectacular surge in exports. China’s GDP grew at tremendous rates, a model that other countries have looked upon with envy and are trying to emulate. The Chinese model, however, is not sustainable, and the Chinese economy will have to shift in response. China must now focus on internal consumption instead of exports. Internal demand must increase at this point.
This is where Taiwan enters the equation. Although there are many political tensions between China and Taiwan, it is impossible to talk about one without the other–they are linked at the hip, economically. Under the new administration and the recent cross-strait trade agreement (ECFA), China and Taiwan’s economic ties are ever more solidified. This agreement is a big deal for Taiwan, estimated at 110 billion USD. Tariffs between the two countries are greatly reduced as a result.
As China’s economic policy shifts these next few years, the US can also look to greatly benefiting. The policy makers in Washington, D.C., would be wise to push for increased access to China’s internal markets, especially as China attempts to focus on internal consumption rather than exports. Instead of viewing China as the enemy, China’s trading partners should take advantage of the changing model. China’s trading partners are poised to become huge beneficiaries and should not push China away in this critical time period.