Gerstner Decries `Absurd' Obsession With China's Growth Rateby
Sees China successful in transition to consumer-led economy
U.S. expansion isn't good enough to solve problems, he says
Louis Gerstner Jr. wants people to stop obsessing over the exact rate of China’s economic growth and look more at the big picture.
The nation’s slowdown is natural as it makes what will probably be a successful transition from exports and manufacturing toward a domestically driven, consumer-led economy, the former executive known for turning around International Business Machines Corp. told Bloomberg Television’s Stephanie Ruhle and David Westin on Monday.
“We have to separate this almost absurd focus on this growth rate of 7 percent to 6.9 to 6.5,” Gerstner said. “It’s a tricky change they’re trying to make. But my guess is they’ll probably pull it off. It won’t be easy. They’ll have some setbacks. But remember, a 5 percent growth in the Chinese economy this year would be equivalent to 14 percent growth in 2007.”
China’s recorded growth rate of 6.9 percent in the third quarter was the weakest since 2009. The nation’s leaders, gathering in Beijing this week to formulate the 13th five-year plan, confront an era of sub-7 percent expansion for the first time since Deng Xiaoping opened the country to the outside world in the late 1970s. Concern that the economy is slowing has roiled global financial markets in recent months, and China last week cut interest rates for the sixth time in a year.
While China faces “serious issues” including what to do with state-owned enterprises, and the data can’t be 100 percent trusted, leaders are focused on bringing another 300 million people into the middle class, said Gerstner, 73, who now serves as a senior adviser to private-equity firm Carlyle Group LP.
The Chinese economy is “slowing down, but I think it’s slowing down with a purpose, with a strategy behind it,” he said.
Meanwhile, the U.S. economy is slowing too much and needs to improve, Gerstner said, citing an estimate of “a little better than” 2 percent for the year. That kind of pace isn’t “good enough to solve the economic and social problems we have in this country,” he said.
Global overcapacity in industries such as automobiles and steel is hurting the U.S., while other industries such as construction are doing well because of improved consumer confidence, he said. The strong dollar is also hurting multinational companies’ revenue and making it tougher to compete, he said.
“We clearly haven’t been able to get the total economy going,” Gerstner said.