After the Financial Tsunami

Antony Leung is senior managing director of the Blackstone Group and chairman of Blackstone Greater China.

NEW YORK, April 23, 2009 – The global economic recession has unmistakably troubled the robust Chinese economy. Import and export levels have decreased and industrial output is growing at a sluggish pace compared to when external factors were favorable. But China's economy will remain resilient in the face of the global financial tsunami, according to Antony Leung, Senior Managing Director of the Blackstone Group and Chairman of Blackstone Greater China.

Speaking at Asia Society headquarters, Leung explained that the Chinese economy's ability to weather the financial downturn is attributable to timely changes in the government's macroeconomic policies. For instance, by the third quarter of 2008, China had already implemented a stimulus fiscal plan and expansionary monetary policies. Additionally, Leung continued, innovative policies "such as issuing home appliances vouchers to rural residents, reducing taxes on new vehicles, providing subsidies to farm machinery purchases, and issuing vouchers to encourage tourism" have boosted domestic private consumption. He also noted that this "shift in focus from expanding supply to stimulating demand is a major policy change" that will further fuel the economy. Furthermore, Chinese culture encourages personal savings—and high personal savings coupled with low national debt provide a healthy environment for further economic development.

Leung predicted that the world's third largest economy may be on its way to securing second-place status in the near future, given that China's socio-political stability is the least problematic of the world's major economies. "Racial, cultural, educational, and political constituencies" remain intact, and "the Chinese government has accumulated more experience in managing the nation as well as the market economy," he added. Long-term growth in China will be driven by a combination of factors, most specifically "full-scale industrialization, higher urbanization, development of the financial sector," and lastly, "reform of the healthcare system." Stephen A. Schwarzman, Chairman and CEO of the Blackstone Group, noted that as the world "works through the global financial crisis, it is clear that," China remains "among the strongest places in the world for financial institutions."

As for Hong Kong, Leung argued that in the past it contributed to China's success in the global economic landscape by virtue of being China's only international financial center. More recently, however, "with the Chinese economy gaining importance and influence internationally, and the determination of the central government in China to ensure Hong Kong's success under the ‘One Country, Two Systems' policy, Hong Kong has received many tangible benefits to help increase its economic development," Leung said.

Leung emphasized the need for enhancing the value-added industries in each of these two economies to remove any trace of competitive hostility and to ensure a mutually beneficial partnership that will bring "rapid growth and lasting prosperity."

Reported by Chandani Punia