Mid­dle class, in­fra­struc­ture fu­el­ing growth

Investment open­ings in East Asia ga­lore as de­mand for build­ing projects, hous­ing soars: Ex­perts

China Daily (Hong Kong) - - FRONT PAGE - By CHAI HUA and ZHOU MO in Hong Kong Con­tact the writ­ers at grace@chi­nadai­lyhk.com

East Asia of­fers huge devel­op­ment po­ten­tial with the rise of the mid­dle-class group, while in­fra­struc­ture con­struc­tion presents tremen­dous busi­ness op­por­tu­ni­ties, in­dus­try in­sid­ers and ex­perts told a fo­rum themed “The prospects of the East Asian mar­ket in the new global econ­omy” in Hong Kong on Tues­day.

“Growth in ASEAN (As­so­ci­a­tion of South­east Asian Na­tions) is tremen­dous and GDP growth (of the re­gion) is one of the high­est in the world,” Pa­trick Ip, man­ag­ing di­rec­tor of China-ASEAN Investment Co­op­er­a­tion Fund (CAF), said at the fo­rum or­ga­nized by China Daily Asia Pa­cific as part of the Hong Kong Sum­mit.

The GDP per capita of the ASEAN coun­tries is also grow­ing at a rapid pace which, in Ip’s words, is “catch­ing up with the Western world”.

How­ever, in­vest­ments in in­fra­struc­ture are not able to meet the de­mand at present, he noted.

“Ac­cord­ing to the A sian Devel­op­ment Bank, an­nual in­fra­struc­ture spend­ing re­quired in Asia is around $1.7 tril­lion. I think gov­ern­ments can make up around 20 per­cent of the funds needed, and for the pri­vate sec­tor, 10 per­cent. So, you can see there’s a huge investment gap in the in­fra­struc­ture sec­tor.”

Bank­ing on huge op­por­tu­ni­ties in ASEAN, CAF has been ac­tively in­vest­ing in a range of sec­tors in the re­gion, in­clud­ing ship­ping and lo­gis­tics in the Philip­pines, a port in Thai­land and health­care in Sin­ga­pore.

Slow­down wor­ries

Kriengsak Chare­on­wongsak, pres­i­dent of Thai­land’s In­sti­tute of Fu­ture Stud­ies for Devel­op­ment, ex­pressed concern that East Asia’s speed of growth will slow down.

“Due to the Trump syn­drome, Brexit and many other is­sues all over the world, trade open­ness has been seen to de­crease this year,” he said, urg­ing the re­gion to work on trade open­ness in or­der to make Asia the new driv­ing force of the world econ­omy.

He said the level of trade open­ness in East Asia was the high­est in 2000, con­tribut­ing 110 per­cent of GDP (not in­clud­ing China), but the per­cent­age had dropped to 85 per­cent in 2015.

“Com­pet­i­tive­ness in the re­gion is on the rise, but it’s in­creas­ing not at the speed it should be be­cause the re­gion has not been prop­erly dig­i­tal­ized,” Kriengsak said, adding it’s a ma­jor is­sue in his as­sess­ment in look­ing at the re­gion’s fu­ture.

But he has seen some East Asian coun­tries chang­ing the sit­u­a­tion by con­cen­trat­ing on devel­op­ing their own tech­nolo­gies, and sci­en­tific pa­pers from the Asian re­gion are in­creas­ing.

An­other op­por tu­nity he found is that East Asia has the fastest grow­ing mid­dle-class group in the world, and their pur­chas­ing power could present a new devel­op­ment op­por­tu­nity.

The re­gion’s grow­ing mid­dle class would lead to in­creased de­mand for in­fra­struc­ture and hous­ing in those coun­tries, Ip said.

Lin Jingzhen, deputy chief ex­ec­u­tive of Bank of China (Hong Kong) Ltd, agreed that the mid­dle class is grow­ing rapidly in the re­gion, and the de­mand for fam­ily and per­sonal-wealth management is ris­ing ac­cord­ingly, pro­vid­ing abun­dant op­por­tu­ni­ties for Hong Kong en­ter­prises.

He ex­pects Hong Kong to play a sig­nif­i­cant role as a fi­nan­cial ser­vices provider in global in­fra­struc­ture investment, which is ex­pected to reach $26 tril­lion by 2030, with East Asia con­tribut­ing more than 60 per­cent of the amount.

Sound model needed

David Deng, gen­eral man­ager of the Cap­i­tal Investment and Management De­part­ment of China Mer­chants Group Ltd (CMG), be­lieves that devel­op­ing a sound investment model is vi­tal for en­ter­prises to ex­plore over­seas mar­kets, es­pe­cially in Belt and Road (B&R) projects.

CMG — a State-owned con­glom­er­ate based in Hong Kong — has cre­ated a port-park-city (PPC) model, which ad­dresses the fi­nan­cial im­pli­ca­tions of the B&R Ini­tia­tive, he said.

By late last year, CMG’s over­seas as­sets had reached 591.2 bil­lion yuan ($87 bil­lion), accounting for 8.6 per­cent of its to­tal as­sets. The com­pany is con­duct­ing busi­ness in six con­ti­nents, in­volv­ing ports, ship­ping, lo­gis­tics, fi­nanc­ing and trade.

Lin­coln Leong, chief ex­ec­u­tive of­fi­cer of Hong Kong’s MTR Cor­po­ra­tion Ltd, stressed that in­ter­na­tional and in­ter­re­gional con­nec­tiv­ity of­fers sig­nif­i­cant op­por­tu­ni­ties.

Be­sides Hong Kong, MTR Cor­po­ra­tion op­er­ates on the Chi­nese main­land and in the United King­dom, Swe­den and Aus­tralia. “The pop­u­la­tion we carry out­side Hong Kong is the same as the num­ber here (Hong Kong),” he said.

Lee Heng Guie, ex­ec­u­tive di­rec­tor of the So­cio-Eco­nomic Re­search Cen­tre of the Asso- ciated Chi­nese Cham­ber of Com­merce and In­dus­try of Malaysia, said although East Asia’s eco­nomic growth has re­bounded this year, thanks to a syn­chro­nized global re­cov­ery, a num­ber of chal­lenges still con­front economies in the re­gion.

He said glob­al­iza­tion is show­ing a re­verse trend, with new trade re­stric­tions emerg­ing, as well as per­sis­tent pol­icy un­cer­tain­ties, mone­tary pol­icy tight­en­ing and other fac­tors that re­quire pol­i­cy­mak­ers to take mea­sures to en­sure stronger and sus­tain­able growth un­der the new eco­nomic nor­mal.

Although in­te­gra­tion of coun­tries in the re­gion is deep­en­ing, con­sid­er­able reg­u­la­tory and other bar­ri­ers still ex­ist, ham­per­ing the process, Lee warned, adding that the pace of fi­nan­cial in­te­gra­tion has lagged be­hind trade in­te­gra­tion.

Stress­ing the im­por­tance of re­gional in­te­gra­tion, he said “in­for­ma­tion sharing” is also essen­tial for healthy eco­nomic growth. “Gov­ern­ments, in­sti­tu­tions and cen­tral banks need to share in­for­ma­tion to avoid an­other fi­nan­cial cri­sis. A les­son from the 1997-1998 and 20082009 fi­nan­cial crises is that (we need to) not only deepen our in­te­gra­tion from the fi­nan­cial and eco­nomic (as­pects), but also share in­for­ma­tion.”


Pos­ing for a group photo at the Hong Kong Sum­mit on Tues­day are (from left) Zhang Haizhou, as­sis­tant to pub­lisher, China Daily Asia Pa­cific; Lin Jingzhen, deputy chief ex­ec­u­tive of Bank of China (Hong Kong); Lin­coln Leong, chief ex­ec­u­tive of­fi­cer of MTR Cor­po­ra­tion; Lee Heng Guie, ex­ec­u­tive di­rec­tor of the So­cio-Eco­nomic Re­search Cen­tre of the As­so­ci­ated Chi­nese Cham­bers of Com­merce and In­dus­try of Malaysia; Jonathan Choi Koon-shum, chair­man of the Chi­nese Gen­eral Cham­ber of Com­merce Hong Kong; Zhou Li, ed­i­to­rial board mem­ber of China Daily Group; Pa­trick Ip, man­ag­ing di­rec­tor of China-ASEAN Investment Co­op­er­a­tion Fund; David Deng, gen­eral man­ager of Cap­i­tal Investment and Management De­part­ment at China Mer­chants Group; and Kriengsak Chare­on­wongsak, pres­i­dent of Thai­land’s In­sti­tute of Fu­ture Stud­ies for Devel­op­ment.

Pic­tured at the China Daily Roundtable

ses­sion are (from left) Lin Jingzhen, Lin­coln Leong, Lee Heng Guie and Pa­trick Ip.

Lin­coln Leong

Kriengsak Chare­on­wongsak

Lin Jingzhen

Lee Heng Guie

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