Is the Chinese Economy Overheating?

China will likely take proactive steps to slow down the flow of money through exports.
  • Transcript


Question: Is China a bubble? 

Azim Premji: I think the Chinese government is realizing that the economy is overheating. So, I think they will take proactive steps to slow it down. The last quarter I understand the growths are running at rates of 12% a year GDP. And two, I think the Chinese government is seriously considering whether they should firm the Chinese currency because of international pressure, but also because the economy is heating up too much in terms of flow through exports. 

Question: What does the U.S. need to do to maintain its status as the leading economy? 

Azim Premji: One is very obviously, which every economist will tell you it’s got to fix its problem of the fiscal deficit. It’s getting out of control. Two, I think the American consumer must learn to live within his or her means. You cannot have a society where you spend more than you earn. I mean, it’s just fundamentally not viable in the long run. I think the corrective steps which are taking place now should lead in the right direction. 

I think one is that the American consumer is learning to save. Right? The savings which were running negative now are running between 4% and 5%. Insofar as the fiscal deficit is concerned, I think the President and his team are addressing issues which are economic to see to it that they contain the fiscal deficit and the President is making tough decisions, which is why he is getting unpopular with some of the commercial leadership.

Recorded on May 7, 2010
Interviewed by Victoria Brown