He disagrees with bears like Jim Chanos, who assert that China is on the verge of collapse because of imprudent lending by the banks that has resulted in a vast oversupply of property. “In Dubai it was a question of speculators, builders who were hoping that a lot of foreigners would buy into it and now of course that bubble’s completely collapsed,” says Biswas. “Whereas in China, you do have a very underlying strong demand and that growth is still continuing strongly.”

 

So what can derail the optimistic scenario? Biswas spoke to CFO Innovation’s Cesar Bacani about the problems in Europe, political and security issues in North Korea and Iran, and other regional and global risks that CFOs would do well to watch.

 

For the moment, one of the biggest risks is what’s happening in Europe. The sovereign debt problems that we’re seeing there are a significant risk to the global outlook. Europe isn’t so important right now as a key market for Asia as it used to be, it’s still an important market. It is an important region of the market economy.

 

What we’re seeing right now is a kind of two-speed Europe. Germany’s doing very well; we’ve just seen the data for 2010 [showing] 3.6% GDP growth last year. It’s the strongest since the reunification of East and West Germany in 1990, so that gives you a sense of what an achievement it was, the rebound that we saw last year. This strong growth is expected to continue into this year, because the weak euro is helping Germany’s export sector. And North Europe generally is doing quite well, if you look at Switzerland, Netherlands, even France.

 

The problems are coming from smaller economies at Europe’s periphery – Greece, Ireland and Portugal – but there are concerns about some of the larger EU countries, too. Spain and the UK are two of the biggest economies in Europe and they both have significant debt problems.

 

There’s a lot of fears about the next country that will need bailing out. Will Spain need help? Will Italy? There was an important positive development in the last few days. Both Japan and China have indicated that’s they’re prepared to buy quite a lot of European bonds to finance some of the sovereign debt in Europe.

 

Nevertheless it’s still very unclear how this will evolve, which next country, if any, will need help, and whether one of the big countries will enter into difficulties and also need help. As a result of this two-speed story, we expect Europe’s growth at only about 1.5% in 2011.

 

I think the risk at the moment is not so much the default; it’s more the need for a bailout. The EU recognises the kind of situation of one of their member countries entering into a default situation. They’re going to do everything they can to try to resolve this situation through a bailout package and restructuring. This is what they’re doing right now with Greece and Ireland and perhaps also [behind the scenes] with Portugal.

 

That’s why the EU is creating this global alliance with countries like Japan and China, which have massive financial resources. They can help underpin the stability of the global financial system to avoid such a risk. Plus, they’re going to increase the size of the EU’s own bailout fund.