Treasury Today Asia March/April 2019

Published: Mar 2019



“The Asian Century” will be about much more than just China

Evidence continues to mount that China’s economy is faltering, though it is uncertain as yet how serious its retreat will turn out to be. With hindsight, it was surely unrealistic to expect that after two decades of stunning growth that has propelled it to the second largest economy in the world, China could continue to grow three times faster than advanced nations.

The slowdown will have global repercussions, certainly, and present yet another challenge for corporate treasurers to manage, but its impact is unlikely to alter the shape of the future to come. For there is a growing consensus that by around 2030 China will succeed the US economy as the world’s largest economy. It’s an expectation that ensures China is more often than not foremost in mind whenever discussions turn to the proposition of “The Asian Century”, the projected 21st century global domination by Asian economies.

Yet, as the recently published and widely acclaimed book, The Future is Asian by Parag Khanna, stresses, Asia is far more than just China – 3.5bn of the region’s 5bn strong population are not Chinese. It’s the whole of Asia that needs to be factored in when assessing its potential future economic status.

The region, which Singapore-based Khanna sees ranging all the way from the Arabian Peninsula and Turkey in the west, to Japan and New Zealand in the east, and from Russia in the north to Australia in the south, already accounts for 50% of global gross GDP and over 60% of global economic growth.

The rather bright prospects for the South East sub-region of Asia, the ASEAN group of countries in particular, underline the fact that “The Asian Century”, if there is to be one, will be about more than just the heavyweights, China and India, the latter itself tipped to overtake Japan, Germany, UK and France to become the world’s number three by 2030.

Even as global foreign direct investment has slumped due to the US tax reforms, South East Asian countries have continued to see healthy levels of FDI inflows and are forecast to grow annually by more than 5% on average over the medium term. The Philippines is a case in point, as we report in this issue. With proactive policies aimed at attracting foreign corporate investment; a US$180bn five-year public infrastructure programme in train; a 107m strong population with a median age of just 24; and expectations of more than 6% growth annually over the next few years, the Philippines is making corporate executives more than just sit up and take notice.

According to Khanna, of an estimated US$30trn in global middle-class consumption growth between 2015 and 2030, only US$1trn is expected to come from today’s western economies, with most of the rest coming from Asia. Such an outturn would amount to a colossal global reorientation in wealth generation and consumption and inevitably, dramatically impact corporate investment decision making.

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