Chinese Economic Talk by Lawrence Lau

I listened to an interesting talk from Lawrence Lau, the President of Hong Kong University about Chinese economy at MSR. The room 1021 at 113 is overwhelmed by a crowd of researchers with diverse backgrounds. In fact, this is the crowdest talk I had experienced on a research or non-research topic. It seems that President Lau did know how to pick a hot topic.

The talk itself reveals many interesting facts, but the slides are a little dry, and for many people who are non-Chinese, they probably didn't receive too much new information from it during the 90 minutes. However, there are several important messages I have received from this talk that are very precious and wise, in my view.

Lau talked about several things:

1. the long term prospect of China's economy is positive. As a conservative person, I always tend to evaluate things with negative views, but Lau's talk makes me convinced that China does has a good base for long term prospect, and an average of 7% growth rate is probably sustainable for the next few decades.

2. RMB is not undervalued very much in a short term. The evidences he gives are China runs low surplus which itself is an indication of a fair value of the currency. Also, he raises the view of Stephen Roach (Chief Economist of Morgan Stanley) that if the control on currency outflow is lifted, the value of RMB will actually go down.

3. The risk of inflation is low due to large amount labor reserves from the rural area.

4. Some other minor things about how to deal with software piracy, the difference between the provincial data and central data, etc.

Overall, the conclusion seems to be:

a. China will be fine in the next few decades, and we should be more optimistic about Chinese economy.
b. Don't worry about RMB appreciation too much. Keep your dollars for now.
c. We can still buy cheap products in China from many years to come.