Understanding the importance of economic security / Value Partners Group

After seeing impressive growth over the years, China now faces several challenges to becoming a more developed economy, including its wealth inequality and geopolitical tensions, especially with the US, that have put increasing pressure on the country.

Given the current obstacles to growth, China would need to embark on several steps to ensure it can achieve economic development. Below is a formula for what I believe China should be doing, with some, if not all, already being implemented by the government:

Modern financial system = Improved capital allocation = Improved productivity = Higher growth = Economic security = National security

China realizes that its national security relies on economic strength. In my view, they are one and the same. If there is no economic security, there is no national security, especially now when countries use economic warfare to take advantage of other nations.

For China, however, one of its biggest problems in achieving economic security is low productivity and misallocated capital, as much household savings are allocated to real estate. This can be addressed by modernizing its financial system: China can increase productivity per person by having a modern financial system and relying on market forces to allocate capital.

Overall, the formula shows that for China to be successful with its goals, creating a modern financial system is essential to have national security.

©2022 Dato’ Seri Cheah Cheng Hye

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