US protectionism on China risks ‘new forever war’ with blunder of historic proportions, economist Stephen Roach warns

Gone are the days of Stephen Roach’s long-held optimism in China’s economy after an abrupt slowdown, as a weakening of productive efficiency belies high-quality growth

Despite China being the world’s most powerful economic driver, ‘the power of the engine is diminishing’

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Economist Stephen Roach has criticized US trade policies against China as a “blunder” that risks creating an endless economic conflict between the two nations. Photo: Bloomberg

Published: 8:00pm, 3 Jun 2024Updated: 8:06pm, 3 Jun 2024

US economist Stephen Roach, whose gloomy views about Hong Kong and China caused controversy recently, has expounded on his view change “in the last year or so”, owing to China’s “abrupt” economic slowdown and potential US-China conflicts.

Speaking on Friday in Beijing, the former chair of Morgan Stanley Asia said his optimism had waned over that stretch amid “worrisome” trends in China. And he added that the US’ recent tariff hikes on Chinese goods were a “blunder” and the result of election-year politics that could drag the two countries into a “new forever war” on trade.

“[The end to China’s growth shock] has been abrupt. The slowdown has been concentrated in the last few years,” said Roach, who had called himself a “congenital China optimist” for most of the past 25 years, until recently

He cited data from the International Monetary Fund (IMF) that showed China’s contribution to global growth dropped from over 30 per cent in 2010-19 to 24 per cent in 2020-23. It is forecast to drop to 21 per cent from 2027-29.

Roach has been outspoken about his dreary forecasts towards China and Hong Kong’s economic growth in recent months. In February, Roach’s op-ed piece, “It pains me to say Hong Kong is over”, sparked backlash, and he defended his stance by saying it was intended as a “wake-up call”. Weijian Shan, chairman and CEO of investment firm PAG, wrote in an opinion piece in the South China Morning Post in April that many Hongkongers eligible to live elsewhere have not moved, and that this was a testament to their confidence in the city.

My outlook is certainly … more cautious right now with respect to China going forward than it has been at any point in 25 years

Stephen Roach, economist

In remarks on Friday, Roach said his change of view on the Chinese economy happened in the “last year or so”, with the main reasons being China’s weakening total factor productivity and “deep-rooted concerns” that China-US ties have gone “from bad to worse over the last few years”.