Chinese dragon set to overcome everything before it this century - including the US

LOS ANGELES - Former junk bond king Michael Milken is picking China to overtake the United States economically this century.

"Our projections show the US will be the world's second-largest economy and India will be the third" some time this century, said Milken, chairman of the Milken Institute, an economic research group in California.

"The most important country in the short run to the US, however, is Mexico."

The controversial financier said that, with "40 million young people looking for jobs and opportunities, anything we could do to help the Mexican economy grow will be fabulous for the US and we would have a great partner".

The former head of junk bond trading at now-defunct Drexel Burnham Lambert also said the US healthcare system needed a radical makeover and President George W. Bush's veto of legislation to expand federal funding of embryonic stemcell research would slow but not stop such work.

Milken's roller-coaster life has taken him from high-flying financier and junk bond king in the 1980s to imprisonment for securities violations in the early 1990s.

He is now a philanthropist focused on improving medical research and curing life-threatening diseases such as prostate cancer, with which he was diagnosed and for which he was treated in 1993.

Milken said he would not consider the US losing economic pre-eminence to be a negative development. "The growth of India and China will bode well for the US in its growth," he said. "There are tremendous opportunities for growth throughout the world."

Corporate governance changes mandated by the 2002 Sarbanes-Oxley law, which toughened reporting requirements for companies and increased penalties for financial crime, had helped the American economy and investors.

"Anything that increases transparency and confidence reduces the cost of capital [and] makes it operate more efficiently."

He also suggested that executive pay should be more closely aligned with company performance. "We need to do a better job of correlating compensation with success, not just for the individual but for investors."

Healthcare, about which Milken became passionate after his bout with cancer, needed to be radically changed. "The easiest solution is prevention," he said. "The US wants the morning-after pill for anything - I ate too much, I drank too much. And I think we all have to take some personal responsibility for how we live and conduct our lives.

"Wellness and prevention are one of the elements that will substantially reduce our healthcare costs."

Countries other than the US needed to step up funding for medical research. Milken estimated that transforming cancer from a cause of death to a chronic disease could be worth as much as US$60 trillion to the economy.

In addition to donating millions to medical research, Milken has taken a hands-on, businesslike approach to improving how the money is used.

He has insisted that research organisations working on the same disease collaborate instead of compete. He has worked to shorten the process of applying for funding and has tried to separate fundraising from research.

"If you set up organisations that raise the money, you can increase productivity immediately 50 to 100 per cent," he said.

He believed that cancer could be eliminated as a cause of death by 2015.

"I am planning to book a vacation for January, February and March 2015 when that happens."

- BLOOMBERG