The Boao Forum for Asia 2016: Pre-Conference Reflections

Reflections on Pre-Conference Reflections

For the last three decades, many Asian economies have been thriving on international trade. However, this regime is now under severe threat due to sluggish growth prospects in developed countries, China’s economic rebalancing and rising geopolitical risk in other parts of the world. In such uncertain conditions, finding joint solutions through inter-regional policy coordination will become more important than ever. Some of these solutions could be 1) Identifying new growth engines within Asia; and 2) further integration of the highly diversified economies in the region.

Asia boasts the two largest savers in the world (China and Japan) who, together, could very well provide ample funding for meeting the shortfalls in infrastructure finance of the less developed economies in the region whose growth is being constrained by a lack of infrastructure investment. That is why initiatives such as the Asian Infrastructure Investment Bank (AIIB), which was unveiled at last year’s BFA, have garnered much interest over the past year. The spirit of AIIB is about creating a robust mechanism within the region so that the vast savings in countries like China could be channeled more efficiently. However, China’s necessary rebalancing is also about laying a more sound foundation for the world’s second largest economy in the long run. In the short to medium term, China’s economic growth will inevitably moderate. But such a transformation of the Chinese economy will surely benefit many Asian economies, bringing new opportunities for growth arising out of a booming service sector in China and increased domestic consumption. For policymakers in the region, coordination is essential if we are to avoid competitive devaluation which is being disguised as pro-growth policies in individual countries which would result in rising protectionism within the region.

Xu Sitao
Chief Economist & Partner
Deloitte China