The Andy Xie Email

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By Andy Xie…. 
As posted at Bloomberg (links added)

I participated in the panels on commodity and China-India and in some obligatory dinner parties. On Friday night, the Singapore PM invited the speakers at the meetings that Singapore government organized. Trichet, Larry Summers, Paul Volker, Chuck Price (sic), the finance ministers of ASEAN countries were there. No government official from China was there. I guess I was there to make it look like China was represented.

The dinner was turned into an Oprah with PM Lee Hsien Long at the center.

The topic was on the future of globalization. People fawned him like a prince. Of course, he is. There are two reigning royalties in the world that the Davos crowd kiss up to, Jordan and Singapore. The Davos crowd are Republican on economic issues and Democratic on social issues. Somehow, they manage to put aside their moral misgivings and kiss up toe Lee Hsien Long and Abdullah.

I tried to find out why Singapore was chosen to host the conference.

Nobody knew. Some said that probably no one else wanted it. Some guessed that Singapore did a good selling job. I thought that it was a strange choice because Singapore was so far from any action or the hot topic of China and India. Mumbai or Shanghai would have been a lot more appropriate.

ASEAN has been a failure. Its GDP in nominal dollar terms has not changed for 10 years. Singapore’s per capita income has not changed either at $25,000. China’s GDP in dollar terms has tripled during the same period.

I thought the questioners were competing with each other to praise Singapore as the success story of globalisation. Actually, Singapore’s success came mainly from being the money laundering centre for corrupt Indonesian businessmen and government officials. Indonesia has no money.

So Singapore isn’t doing well. To sustain its economy, Singapore is building casinos to attract corrupt money from China. These western people didn’t know what they were talking about. Aside from the nauseating pleasantries, some useful information came out of it.

Trichet sounded very bullish on euro-zone economy. He noted that euro-zone was catching up with the US in growth rate and talked about further gain in 2007. His tone was much more bullish that our house view. As Japan is surprising on the downside, I don’t see how the rise of the euro-yen could be stopped.

Larry Summers and Paul Volker were very worried about the US economy. As you probably know, Alan Greenspan is talking the same way. At the CLSA conference last week, he talked like one of his critics. There is a fear of a US collapse. Many Americans think that an Rmb reval would save the US.

This is just a dream, in my view.

Most were worried about the future of globalization due to income inequality. As average workers in the west are not seeing wage increase, they may vote against globalization. I thought that they were understating the benefit from cheap consumer goods. However, as inflation comes back, it does diminish the benefits for western consumers.

No one was worried about the growth outlook for China or India. The Indian Planning Minister was very bullish, talking about 9% forever.

My sense is that policymakers are relaxed about the short-term economic outlook but anticipate a US collapse at some point. Americans think that Rmb reval could save the US. So they would keep pressuring China.

Andy Xie