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Li & Fung Chairman Predicts Soft Landing for China, Growth in US

Li and Fung Chairman Victor Fung is bullish on the US economy. In an interview with Swedish publication Finanz und Wirtschaft, he said that the risk of the US relapsing into a recession is, “not great.” Asked about the US fiscal position overall, he said, “The U.S. economy is on a relatively sound fiscal consolidation path. This is indicated by the increasing orders out of our American customers.”

He also believes that the Chinese economy is headed for a soft landing, with grow headed for Primier Wen Jiabao’s estimate of 7.5%. He said, “The probability of a negative scenario is low.”

When asked about minimum wage increases and their potentially deleterious impact on the country’s export engine, he said that minimum wage increases have been rising 13.4% annually, but it’s ultimately a good thing.

“Companies are forced to increase their productivity through increased investment in technology. This is good, because the world’s second largest economy continues to rise up the value chain. Higher wages lead to…lower social differences, which contributes to the stability of China,” said Fung.

He said that Li and Fung is equipped to weather the changes, because a higher value level for China will increase productivity and quality. Inefficient operations can be shifted to Vietnam or Bangladesh, and Chinese citizens can become consumers.

He does not predict further streamlining of the supply chain, because it would increase vulnerability. Costs will be controlled through shifts in the location of production, whether it be to central China or to less developed countries.

The full text of the interview is available here, in German.