SINGAPORE, Nov. 14, 2009 (Xinhua News Agency) -- The current recovery in the Asia- Pacific region is fragile, and the key to sustain a growth is to lift demand, especially consumption, said Stephen Roach, chairman of the Morgan Stanley (NYSE:MS) Asia, here Saturday.
"The key for the world to get the demand side going is to find a new source of demand, hopefully right here in the developing Asia," said Roach in an exclusive interview with Xinhua on the sidelines of the leaders meeting of the Asia-Pacific Economic Cooperation (APEC).
The worst of the economic recession is over, but the recovery now is temporarily driven by the shift of the inventory cycle, he said.
"But the demand underpinnings, especially for consumers of the world , remain under a dark cloud, because of the serious problems of the U.S. consumers," he said.
Roach warned that in a weak recovery, a relapse or another dip is possible.
"If you don't have a vigorous uplift in demand, you have to be very mindful of such problems," he said.
The main engine of demand in the world over the last dozen years had been consumers in the U.S., "but now you have to forget about that," he said, noting that the consumption model in the U.S. is not on a sustainable basis.
Hopefully right here in the developing Asia, consumption is at a record low share of Asia's GDP, he said, adding that this is one of the key issues that need to be addressed.
Roach said that he was very much impressed by Chinese President Hu Jintao's speech at the APEC's CEO Summit on Friday.
"The president speech is excellent. He promised to focus a lot of attention on stimulating internal private consumption. I think China will do that as I'm very impressed by China's pragmatism and rising to the challenge," he said.
Roach said the challenge for China to move away from the investment and export growth model had never been greater in today' s post-crisis environment.
The sooner China puts the promise into clear action, the better China, the APEC region and the world will benefit, he said.
China had done an impressive job in stimulating economic growth in the first three quarters of 2009, but China should not over- depend on investment for growth to avoid another economic downturn, he said.
"I'm very optimistic that China will focus on the upcoming 12th- five-year program from 2011 to 2015," he said.
The program will take action in stimulating internal private consumption by focusing on safety net, social security and private pensions, medical insurance and unemployment insurance, supporting rural family incomes, and laying out a blueprint of developing large-scale consumer and service industries, he said, noting that if the program was fully carried, China will grow in a sustainable manner.
The leaders from APEC's 21 members will convene their annual meeting on Saturday and Sunday, focusing on how to deal with the global economic crisis and secure a lasting economic recovery.
"I hope they continue to pin on regional economic integration, support to internal private consumption in Asia and engagement rather tensions with the West, primarily the U.S.," he said.
