No one has perfected the veiled threat as well as Larry Summers, President Obama’s chief economic adviser. It was on fine display at the World Economic Forum on Saturday.
He was speaking on the main economy panel with Zhu Min, deputy governor of the People’s Bank of China, so it was a great cast list. Mr Zhu’s contribution was to say how he recognised China couldn’t rely on the US consumer for growth in the future, understood there was excess capacity in certain Chinese heavy industries and vowed policy was to make structural changes so that demand would re-balance away from exports and towards consumption.
That is all very well and such cooperative noised certainly please the Davos crowd, but four years ago, his boss made almost the identical contribution to the same panel debate, pledging to slow China’s reserve accumulation and shift demand towards domestic consumption. When asked why anyone should trust Mr Zhu’s words today when there is no evidence of a serious shift from four years ago, he made a half-promise: “It’s a long process … you will see progress day-by-day, year-by-year”. My bet is that the first half of his sentence turns out to be true.
