Faber predicts China’s rise as an economic centre

Leading Swiss investment analyst Marc Faber is convinced that some Asian economies could overtake the United States in the next ten years.

Faber told swissinfo’s Robert Brookes that China in particular was set to drive the world economy.

swissinfo: You’ve said that China will become the workshop of the world. It’s going to become an economic locomotive. Can you explain why?

Marc Faber: It’s important to understand that some markets in China are already larger today than in the United States.

China produces more steel than America and Japan combined and is still importing steel. It produces five times more cement than the US. Motorcycle sales in China are much larger than in the US. China produces half the microwave ovens in the world… so the physical markets are already huge and because of the strong growth as a result of industrialisation and a rise in the standards of living, China is increasingly becoming a customer of surrounding countries.

It is now the largest user of copper in the world. It is a large importer of iron ore, of nickel and of copper because the country is relatively resource poor. It is also a large importer of food products, so that benefits countries that can supply China with these requirements.

So, to some extent, economies will increasingly watch the Chinese business cycle. When the economy is growing rapidly in China, it will have a beneficial impact on surrounding countries. Conversely, when China is in recession obviously the demand for imported goods, for resources, will diminish and then you will have weaknesses in commodity prices.

swissinfo: What will happen in your scenario to the US economy?

M.F.: I think that if you look at the position of the US, it’s inevitable that the dollar over a period of time will lose its purchasing power. Between 1971 and 1980, the dollar depreciated by 70 per cent against the hard currencies in Europe, for example the German Mark and the Swiss franc.

I doubt that the dollar will depreciate by that much against, let’s say, the euro because Euroland has similar problems to the US – high production costs – and will also increasingly shift production to China.

I think all paper currencies will lose value in terms of their purchasing power. In other words, we’ll have some kind of paper inflation, real estate will appreciate vis-à-vis financial assets and gold and raw materials will appreciate. In general, the Asian currencies as a block could easily appreciate by 30 per cent against the euro and the dollar, and Asia would not lose its competitive position.

swissinfo – interview: Robert Brookes