In March 2007, Chinese Premier Wen Jiabao took the stage at the National People's Congress and declared the economy was "unstable, unbalanced, uncoordinated and unsustainable." Two-and-a-half years on and one global financial crisis later, China's economy is powering forward while the developed world stumbles. But problems brew beneath China's surface that most investors gloss over.
Stephen Roach, the chairman of U.S. investment bank Morgan Stanley's Asia business, isn't one of them. In "The Next Asia," he explains the instability and imbalance wrought by China's export-oriented, mercantilist development path, which breeds deflationary overinvestment in manufacturing, ravages the environment and ultimately invites protectionism from China's besieged trade partners. However, throughout much of his book, which was written between 2006 and mid-2009, Mr. Roach appeared convinced change was just around the corner. As he acknowledges in the more recently drafted bits, he was wrong.
Read Full Article »