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Morgan Stanley’s head of emerging market equities is convinced China’s slowdown has opened a window for the U.S.In a New York Times op-ed, Ruchir Sharma writes that if GDP rates hold steady for both countries, the U.S. will recapture the lead as world’s largest GDP growth contributor.
Here’s his full quote:
“China became the biggest contributor to global G.D.P. growth in 2007, and it has held the lead ever since. But if the United States continues to grow at its current pace of about 2.5 per cent, and China slows to 6.5 per cent, then the United States will regain the lead this year — contributing 23 per cent of global growth in 2012, compared to 18 per cent for China — and it will hold that lead at least through 2015, according to Morgan Stanley research.”
Sharma also says the downshift, which is an entirely expected stage for any “miracle economy,” will aid U.S. manufacturing — citing a Boston Consulting Group report suggesting China will lose most its cost advantages by 2015 — and even gas prices.
“China’s slowdown is setting the stage for a drop in the price of oil, which has had a crippling effect on growth in the United States. In recent years China has accounted for nearly half of global growth in oil demand, and every 1 per cent of G.D.P. growth in China added 10 to 30 per cent to the price of oil.”
Sharma closes by suggesting we should all curb our freakouts, both bullish and bearish, about the Middle Kingdom.
A smooth downshift to 6 or 7 per cent makes China a more normal rival, one the world can do business with and compete head to head against — one that should generate a lot less worry.