China’s policies to boost domestic demand may take effect later this year, according to JP Morgan’s Chief Economist Bruce Kasman. Speaking to a packed room in Beijing’s Westin hotel today, Kasman said, “We look favorably on the actions that have been taken by [China’s] policymakers, and we look to see China beginning to show signs of improving domestic demand in the coming months.”
Kasman’s speech was by and large devoted to the state of the US and global economies, and he generally painted a grim picture. While he believes that the US stimulus package and other policies will help the country sidestep an acute economic crisis, chronic structural issues will continue to plague the world’s largest economy for a number of years. Chief among these issues: unemployment.
He sees US unemployment peaking around 9%, and called rising unemployment over the next three to five years “a major transformative event on the macro scene.” Getting US employment levels back to reasonable levels – which Kasman puts at 6% – will take a number of years and some high flying. JP Morgan estimates that were US unemployment to clock in at 8.5% by the end of 2009, it would take GDP growth of 8.8% to bring it back to the 6% level by the end of 2010. The US would have to post average yearly GDP growth of 5.6% to bring unemployment to 6% by the end 0f 2011, and average growth of 4.6% to bring unemployment back in line by the end of 2012.
Needless to say, these growth scenarios are unrealistic at best.
While China’s economy is better suited than many to weathering the global economic crisis, Asian and emerging market economies have yet to feel the full impact of the economic slowdown. Now would be a really great time for those 1.3 billion customers to go and buy a pair of Nikes. Or televisions. Or cars and apartments.