A guy strolls past a closed and boarded up dining establishment in the City of London on August 21, 2020.
Tolga Akmen | AFP | Getty Images
SINGAPORE — The significance of China’s function worldwide economy has actually not lessened regardless of increasing geopolitical stress, stated Douglas Flint, chairman of Standard Life Aberdeen.
“I think China is hugely important to the global economy and to global trade,” stated Flint, who spoke with CNBC’s Nancy Hungerford throughout this year’s virtual Singapore Summit.
“Seven months ago, every single company in the world virtually saw its growth opportunities in Asia, led by China. I don’t think that’s changed,” he stated on Wednesday. An extremely strong middle class and the desire to consume in a various method will continue to drive the economy, he stated.
But Flint acknowledged that geopolitical stress can provide brand-new obstacles for business.
“Business operates under the umbrella of a geopolitical relationship, and when that relationship is tense, it is more difficult for business to operate,” he stated. “Having said that, at the business level, our own relationships with our counterparts and clients in China continues to be very strong. It is not impacted at that level, but obviously there’s an overriding political relationship that makes things difficult.”
He likewise explained that there’s a distinction in between the political rhetoric and real carry on the ground.
“There are many elements in the Chinese economy that are continuing to open up, and we’ve seen many of the major U.S. firms — BlackRock, Vanguard, JPMorgan — beginning to expand their operations, even during this period in China,” Flint stated.
That reveals ongoing development towards the combination of the Chinese economy into the international economy that both sides have actually desired, he stated.
“But the political rhetoric is somewhat distant from what’s happening on a commercial side. I think we need to try and bring the two back together and, as I said, I think that should be done through engagement.”
Weaning off financial assistance
Flint likewise explained that numerous economies have actually ended up being based on federal government assistance as an outcome of the coronavirus crisis, and it will be tough to wean them off help.
“That government support was timely,” he stated. “It was extremely heavy in terms of its impact, but it can’t go on forever.”
Countries presented generous financial plans to assist services and people in the wake of the Covid-19 break out and subsequent lockdowns. However, issue has actually grown over what will take place when that assistance is withdrawn or goes out.
“I think the challenge for governments across the world is how to wean the economy off governmental support,” he included.
It will be a “significant” obstacle since self-confidence will fall as individuals begin losing their tasks. “That then has sort of a multiplier effect on what happens, in terms of people’s willingness to go out and spend, and do the things that would bring the economy back.”
“How to get the economy functioning in an independent way again … is going to be very important, and how to use the firepower that the central banks and governments may have left, to target that very specifically and efficiently to the sectors that need it,” he stated.
Flint included that the requirement to develop durability in different sectors is a crucial lesson from the coronavirus. He stated the banking system was strengthened after the international monetary crisis, which assisted it to endure an “extraordinary stress test” this year.
“If the amount of money that had been spent strengthening the financial system had been spent on strengthening the health service and other parts of the economy that have been severely tested in the pandemic, we probably would have had a much lower cost to society,” he stated.