Let Chinese firms come in, don’t get hung up on small things, says economist Andy Xie

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On Indian, Chinese economies…
These economies are low base economies. There’s a natural upward tendency. People are doing things better. Investment is still happening. There is growth. The issue is whether this growth is sufficient? Are we happy with that growth? So, obviously the economies have slowed down. India’s nominal GDP in US dollars terms is about $2.2 trillion. That’s very low. So, the normal growth is just not acceptable. This is something that people should realize.

China has slowed down, nominal growth is about 8%. China can do better also. That’s why structural reforms are very important because developed economies are in trouble in the sense that they cannot support global demand anymore. Emerging economies have to think about how they work together to grow themselves.

India’s protectionism & FTAs…
We talk about globalization but India is one of the most closed economies in the world. A lot of business groups dominate the economy. That’s not normal for large economies. These business groups have the money to influence the political system.

Chinese companies and India…
Let foreign money come to own power plants. For Chinese companies, it’s difficult to get in. There must be foreign ownership of toll roads, ports, power plants. If you are willing to let people own, capital comes and stays here permanently. I don’t see any downside for India.
Chinese companies and security issues…
If you are poor what’s the point of being secure? Chinese don’t think like that. They think that if you are poor, you have nothing much to lose. People want to get into India, but really in the stock market. In terms of the real economy, it is difficult.

Let Chinese come and build steel mills, build power plants, equipment, anything that is bordering on economic development. Chinese are by far the most competitive. Other countries are not even close.

Advice to PM Narendra Modi…
India is all about building the country. China is the most important partner for India. Don’t get hung up on small things. India needs capital to build the country and it’s all about getting capital, whoever can give it to you, whoever can build for you, be practical. Be colour blind. Nobody is perfect, everybody has problems.

India and the global supply chain…
I don’t see that. People that are moving out are in shoe manufacturing or furniture. These are the two businesses that I see leaving. They are not coming to India. They are going to Vietnam, Bangladesh and Indonesia. India as a labour market is not competitive.

Crony capitalism in India…
In India, bigger business groups have so much political influence. Look at Brazil, such a well-endowed country. It used to be very rich hundred years ago. The country is in a vicious cycle. All these businesses, they are basically crony capitalists, bribing politicians to protect their businesses. There’s no mobility for young people like Jun Lei (Xiaomi chairman) moving up and doing something new. It is all part of established business

Startups, Internet and bubbles…
Internet at this time is a huge bubble. You look at all the Internet businesses. They don’t create anything. They are trying to redistribute existing businesses from their channels.

They are taking business away from others. They can do that because they have access to cheaper funding. People are pouring money into them like Amazon is entering every business. It is a lot worse than 2001. In 2001, we had entities like AOL. The people who went in there wanted to do something different.

True global companies have risen because of intranet and that’s a big plus in terms of productivity. But this time, there is no productivity gain. One of my old professors said that we see computers everywhere except in productivity.

It is worse in the sense it doesn’t add value. Where is Facebook adding value? It is just taking advertising revenues away from established media outlets and it makes money because people are entertaining each other. You get them together, Internet is like hosting a party.

Then you stick some commercials in between and you make a lot of money. People who used to provide the real stuff they are unemployed. The society has become a whole lot worse. Google says it is a real technology company. What work Google does is that millions of people are creating content, then they find a way to get to this stuff. They are clever people. They are doing arbitrage business.

Internet is a gigantic tabloid. This is Donald Trump’s world. Donald Trump rose in the tabloid world. It’s all about distraction. What is disruption? You make people dumber by this disruption. Then you look at e-commerce. E-commerce is all about selling fake stuff. Any e-commerce business which is prospering must be selling fake stuff. You look at how they make money. The issue is interest rates have stayed so low for so long. People say US is raising interest rates — from zero to 1%. Wow! people are scared.

On Internet companies going bust…
Not Facebook at least. We had a Myspace.com that wound up business. Nobody paid attention. Google can be supplanted by someone else. This is a search engine, lot of people can do this.

If the Internet bubble bursts…
Rich people becoming poorer. It doesn’t affect the poor people. They don’t have any money. What is going on is that they have created this game. It’s the stock market, monetary policy, Internet. Internet business model is all based on cheating. Most people are not smart. They get robbed. They went to the stock market they got robbed, then they went to the Internet and they got robbed again. So, all the rich people are playing the game themselves. It is very difficult for this bubble to burst now.

These people have nothing else to do. They only know speculation. The speculator’s community becomes bigger, bigger and bigger. Eventually they control the financial system so they won’t let it burst.