Deputy Director of the Asia and Pacific Department of the International Monetary Fund (IMF) Markus Rodlauer came to campus to present on the future prospects of the Chinese economy. The talk, “China at a Crossroads: Reform and Rebalance, or Else…?” took place on Wednesday, Nov. 12 and was a part of a series of career talks the College of East Asian Studies (CEAS) is launching to help majors find internships and jobs.
Professor of Philosophy and East Asian Studies Stephen Angle commented on Rodlauer’s credentials in an email to The Argus. According to Angle, before assuming his current position at the IMF, Rodlauer served many roles within the organization: deputy director of the Western Hemisphere Department; mission chief for a number of countries in Asia, Latin America, and Eastern Europe; and representative to Poland and the Philippines. Angle expressed hope that Rodlauer’s expertise would help students in their job searches.
“East Asian political economy is one of the largest concentrations for students in the CEAS,” Angle wrote. “I am also pleased that he’s going to offer some advice for students interested in careers at institutions like the IMF.”
As the mission chief for China, Rodlauer surveys extensive data to determine the relative health of the economy, on both a national and provincial level. In his presentation, he emphasized the continued growth of China’s economy, the second-largest in the world.
“China is at a watershed in many ways,” Rodlauer said. “This focuses on the economics, as is our mandate at the IMF.”
The IMF was founded as an organization under the United Nations to prevent the confrontational and reckless policies nations pursued before the Great Depression. While today’s global economy faces less dire straits, Rodlauer noted the unpleasant possibility of a Chinese credit crisis, which he believes could occur if the Chinese government does not undertake serious reforms. According to him, China’s economy is currently off-balance, as the percentage of gross domestic product (GDP) tied up in investments rather than consumption is double that of the average Western economy, symptomatic of a lack of domestic growth in labor-intensive and highly productive fields, such as service industries.
However, the largest threat Rodlauer sees in China is more concrete and visible: real estate. In small- and medium-sized cities across the nation, there is an excess of housing; however, Rodlauer notes, in the largest cities, such as Beijing, Shanghai, and Guangzhou, there remains a strong demand for housing and a relative scarcity.
Rodlauer also expressed concern over false figures. He noted some unease over the exaggeration in municipal growth reports, but also said that the central government’s estimates have been verified by his IMF team. What concerns him more is the deficit that China is currently running, which may be underreported by 9.2 percent. Current figures place the balance at -0.9 percent of GDP, while Rodlauer says it should actually be listed at -10.1 percent according to calculations considering local off-budget spending.
In an interview with The Argus, Rodlauer discussed several other challenges China is facing economically, including the Lewis Turning Point. This is the point at which an economy can no longer rely upon the transition from agriculture to industry for growth. According to Rodlauer, eastern China has already reached this point, raising concern for how the nation will adapt when every province reaches the point.
Yet he emphasized, as he did in his presentation, that the West should not fear a Chinese slowdown.
“They’re not [at the Lewis Turning Point] yet; they still have a few more years,” Rodlauer said.
Moreover, Rodlauer reiterated that there is plenty of time for China to reform its economy through an emphasis on domestic consumption and the creation of labor-intensive service industries. Quickly enacted reforms would cause near-term slowing, but would ensure long-term success.
Reactions in the crowd to the lecture were favorable.
“I found the presentation to be fascinating, both as a window on how the IMF works and for bringing out very clearly the challenges facing the Chinese, and world, economy going forward,” Angle said.
An attendee of the event, Misha Yakovenko ’18, said that the presentation persuaded him that China has the potential of becoming one of the strongest economies in the world. He appreciated Rodlauer offering various scenarios of what the world can expect of China in the future, backed up with hard statistics.
“In addition to the in-depth analysis of the macroeconomic indexes of China, he did a very good job drawing connections between the issue of real estate and the growth of domestic investments,” Yakovenko wrote in an email to The Argus. “Another interesting aspect of the presentation [was] his insights into the world’s reaction to the reforms being conducted by the government and how they are affecting other countries.”
Rodlauer emphasized this point when speaking with The Argus.
“China’s position in the world economy has changed in a massive way,” Rodlauer said. “What happens in China matters to the world. Developments elsewhere matter to China.”