MercoPress. South Atlantic News Agency

Who is to replace US consumer as the global growth engine?

Robert Zoellick, World Bank president looking out to China and Brazil

Since the United States consumer is no longer the main global growth engine, experts are expecting China to take over the role, although they are also looking for other locomotives in other regions of the world to help with economic recovery.

“What is going to replace the US consumer as the origin of global demand is not yet very clear” World Bank president Robert Zoellick said during the annual assembly of the bank and the IMF, this year in Istanbul, Turkey.

Before the crisis, roles seemed quite evident: US households indebted heavily to purchase goods from Asia, mainly China thus helping with world growth. But since then things have changed and the deck of cards was reshuffled.

US consumers have become more prudent “and the savings ratio has increased considerably and could remain high for some time to come”, admitted IMF Managing Director Dominique Strauss-Kahn.

“In this context the responsibility of feeding the world’s economy engine rests on other countries, particularly on those that have an economic model based on exports”, added the IMF chief, but “that transition won’t be easy”.

China, clearly indicated by Strauss-Khan, still has not assumed the role in spite of the fact Beijing promised to inject a domestic stimulus equivalent to 660 billion US dollars in two years to help compensate the fall in exports.

Since China has no developed old age pension scheme, the Chinese people spend most of their lives saving for old age. More over Jong-Wha Lee, Asia Development Bank CEO said that the huge benefits accumulated in years by export corporations are not transferred to the workers and staff.

Jong-Wha Lee said that corporations’ benefits must be re-oriented to homes so that household consumption begins to consume”.

However China could be facing next year several problems linked to the strong growth of credit and the country’s dynamism could not be sufficient to lead world demand.

“A balanced global economy needs several poles of growth and it’s not enough to add China and India”, said Zoellick. “Countries in Latinamerica, Asia and the Middle East could also contribute” he added.

Ilan Goldfain, Brazilian bank Itau Unibanco CEO agrees that the Brazilian middle class could contribute to rebound global demand and confirm its role as the leading regional economy, which it assumed this year by leading recovery in Latinamerican, mainly through its exports of commodities to China.