Crisis caused Asia's rise as regional financial hub, economists say

Nov 6, 2009, 5:42 GMT

   Seoul - The global financial crisis has triggered the rise of Asia as a regional financial hub with the Asian economy leading the world economy's recovery, economists said Friday in Seoul.

   'If concern still lingers in Europe, and Americans tend to be cautiously optimistic, Asian optimism is definitely obvious,' Dominic Barton, global managing director at McKinsey & Co, said at the Seoul International Finance Conference 2009, a gathering of more than 400 international economists.

   Asia's economy was proving more resilient than expected, economists said, the region's optimism fuelled by rising numbers of consumers and massive government spending on infrastructure.

   There are about 900 million middle-income consumers in China and India whose per-capita annual income averages 5,000 US dollars. 'These Asians will definitely buy more televisions, cellphones and cars. The solid consumerism rise will support Asia's rise as a major financial hub,' Barton said.

   Barton assumed that about 10 trillion US dollars would be spent worldwide on infrastructure in the decade ahead. 'Asia represents 40 per cent of this forecast infrastructure spending,' Barton added.

   The financial crisis has significantly changed the global financial-centre landscape. 'As a result of the financial crisis, the overwhelming dominance of Western finance has come into question. One of the results is a shift towards Asia,' said Jeffrey E Garten, former dean of the Yale School of Management.

   Asia is forecast to represent the world's most lucrative financial services market sometime around 2012 and cities like Singapore, Kuala Lumpur, Seoul and Shanghai are competing to become new financial hubs, following in the footsteps of Tokyo and Hong Kong.

   Shanghai is regarded a prime candidate, owing to its links with Hong Kong and China's growing economic power.

   'China is Asia's main assembly and production hub, boosting [Shanghai's] rise as a regional financial hub,' said Cyn Young Park, economist at the Asian Development Bank.

   'By 2020, when China is to become the second largest economy in the world and per capita gross domestic product reaches 10,000 US dollars, China could realize full currency convertibility and the yuan become one of the most important international currencies,' said Mingqi Xu, professor at Shanghai's Academy of Social Sciences.

   However, Asia still needs to do more to rebalance its sources of growth by promoting greater domestic demand and reducing reliance on external markets before assuming a more dominant role, Park said.