Alibaba Group Holding Ltd founder and executive chairman Jack Ma thinks the current brouhaha surrounding the state of the Chinese economy is over blown. And instead predicts that the U.S. is in far worse shape.
Speaking at the annual Clinton Global Initiative meet in New York on Tuesday, Ma implicitly suggested that the average Americans’ propensity to splurge could be leading us to the next big bubble.
“You Americans love to spend tomorrow’s money, and other people’s money maybe,” Ma said.
China Will Emerge Stronger
Talking about China, Jack Ma said his country’s high savings rate and ongoing transition to a consumer-driven economy should help weather the current global slowdown.
“You American people worry too much about the China economy. Every time you think China is a problem, we get better, but when you have a high expectation for China, China is always a problem.”
Ma’s claims are backed by World Bank figures. Chinese indeed are among the world’s biggest savers. The World Bank has ranked China fourth in terms of gross savings as a percentage of total GDP. At 50 percent, it trails only behind much smaller Kuwait, Bermuda and the special Chinese administrative region of Macao.
The U.S. in contrast, has gross savings of only around 18 percent of GDP – even Colombia is higher.
Ma attributes this Chinese desire to save to the time when the country was poor.
“We’ve been poor for so many years: When we made money we put it in the banks because someday we know that disaster is coming so we can spend the money,” Ma said. “When the economy is bad, we still have the money to spend — you guys probably don’t, you worry.”
China Moving Towards a Consumer Led Economy
Jack Ma argues that the transition from a manufacturing led economy to one that is driven by consumer demand should be good for China, long-term.
“In the past 20 years, government is so strong, now they’re getting weak: It’s our opportunity, it’s our showtime to see … how we can develop real consumption here,” he said.
A large number of market watchers have raised concerns about China’s ability to navigate this massive economic transition. Some have even argued that the fall of Chinese exports will be too big a blow for Beijing to emerge unscathed.
Ma rubbished these doomsday forecasts, and instead said he sees much more of an upside to this current economic shift.
“When we export we have a terrible sky, we have terrible water, we have a terrible environment — when we start to import we’re going to be better. So that’s all a great opportunity, guys, be happy about that.”
Alibaba Growing Despite Weak China
Despite the weakness in China, Ma says Alibaba Group Holding Ltd is managing to grow. And given the current projections, the e-commerce giant is well on track to surpass Walmart’s sales by the end of this year.
“Consumption is still going up on Alibaba,” Ma said. “This is because when the economy goes down people look online to Alibaba to buy cheaper things.”
Shares of Alibaba Group Holding Ltd are currently trading around the $60-mark. The stock is down over 40 percent year-to-date.