China Daily Asia Weekly:Historic opportunities lie within reach

As Asia moves forward into 2015, the region is standing on the threshold of historic opportunities.
China is taking the lead in a number of initiatives. The newly proposed Asian Infrastructure Investment Bank will start with $50 billion capital to finance projects across the region. In addition, a Silk Road fund with $40 billion will be set up to boost regional connectivity.
In September 2013, the concepts of the New Silk Road and the 21st Century Maritime Silk Road were revived by Chinese President Xi Jinping during an official visit to Southeast Asia.
For centuries, the Silk Road, both overland and by sea, facilitated the trading of Chinese silk, spices and tea. The Chinese vision is to create an integrated economic belt to benefit economies along the ancient route — from ports in South China to South and Southeast Asia, the Middle East and Europe.
“These plans are exciting, unprecedented and real, offering tremendous opportunities for potential investment,” said Zhou Li, publisher and editor-in-chief of China Daily Asia Pacific, speaking on Jan 20 during a session titled China, ASEAN and the New Silk Road — Global Financial Perspectives.
The China Daily-sponsored roundtable event was held as part of the two-day Asian Financial Forum, which kicked off in Hong Kong on Jan 19.
There is a great deal of excitement building around opportunities awaiting China and ASEAN. The New Silk Road will connect China, the world’s second-largest economy, with the 600-million-strong Association of Southeast Asian Nations (ASEAN).
Today, ASEAN is a fast-growing market with a combined GDP of $2.4 trillion, and is the world’s seventh largest economy.
“This new dynamic has the ability to create tremendous forces of change in finance and business,” said Raymond Yip, deputy executive director of the Hong Kong Trade Development Council. “It will impact regional and global economic gravity, setting new ground rules for development and sustainable growth,” Yip told the audience.
One view is that the New Silk Road initiative will be conducive to the launch of the ASEAN Economic Community (AEC). By December, ASEAN will see a single market and manufacturing base with free flow of goods, services and labor.
Thanks to its geographical proximity, the 10-member ASEAN bloc will be the first stop on China’s ambitious road map.
“The realization of the AEC will require regional effort as well as support from neighbors such as China,” said Xu Ningning, executive president of the China-ASEAN Business Council.
Although the New Silk Road is a Chinese-proposed concept, it is a “concerted effort” to promote mutual development and shared prosperity in the region, Xu emphasized.
While Southeast Asia is a vast region with huge income disparities, the Chinese initiative could be a timely solution to close the development gap in ASEAN. “China has a policy of befriending its neighbors. We will help our ASEAN neighbors to improve their infrastructure,” Xu added.
According to the Asian Development Bank, the region will need to invest $750 billion annually in infrastructure during the period 2010-2020.
Currently, dozens in infrastructure projects are being financed by a string of Chinese funds.
In Indonesia alone, total investments in infrastructure will reach $450 billion in the next five years. State budget will only finance about half of that sum and one-third will come from private funds, especially from abroad, according to Perry Warjiyo, deputy governor of Bank Indonesia, the country’s central bank.
Apart from hardware infrastructure development, China-ASEAN collaboration also lies in areas such as finance.
The establishment of Chinese yuan clearing banks, such as the Industrial and Commercial Bank of China in Singapore and the Bank of China in Malaysia and Thailand, will also benefit from bilateral trade and economic exchanges, said Michael Yeoh, CEO of the Asian Strategy and Leadership Institute, a Malaysia-based think tank.
Yeo said: “China can focus on the three ‘C’s that will deepen bilateral relations: Connectivity, community and centrality. These will make China a true partner for ASEAN.”
On the other hand, rapidly growing Chinese homegrown technology brands have made inroads into the country’s financial services sector in recent years.
Vivek Pathak, Asia-Pacific director at the International Finance Corporation, envisages the development of a “virtual Silk Road”.
“It could be in the form of online financial institutions that could connect ASEAN with China and other economies such as India,” Pathak suggested.
From the launch of virtual credit cards to WeBank — China’s first online-only bank launched this month by Internet giant Tencent — new technology is expected to provide new financing channels for small and mid-sized borrowers.
In September, Chinese e-commerce leader Alibaba achieved the world’s largest global initial public offering (IPO) at $25 billion. For some, however, what matters most is not the size of Chinese IPOs, however impressive, but the tremendous impact of Chinese enterprises venturing abroad.
“The growing ties between China and the region will only encourage more greenfield investments and cross-border mergers and acquisitions by China,” said Edward Chen, a distinguished fellow at the University of Hong Kong, who is also president of the Qianhai Institute for Innovative Research.
Established in 2011, the Qianhai special economic zone is situated in the economic hub of Shenzhen, in South China’s Guangdong province.
Chen said that Qianhai would serve as an avenue to channel funds from the region for this new wave of investment. His rationale: 2015 is when ASEAN integration reaches new heights with the coming of the AEC.
“China certainly would like to further cooperate with the ASEAN to form an economic zone much bigger than before,” Chen said.
Panelists also recognized that China’s Silk Road initiative has been met with enthusiasm from some but skepticism from others.
One view is that the Chinese proposal should be more than a funding initiative. Asia is not short of development funds pouring in, but sustainability often remains an issue.
“How can we have sustainable, long-term growth in terms of financial, environmental and social impacts?” asked Li Yao, CEO of the China-ASEAN Investment Cooperation Fund, a quasi-sovereign fund established by China to support building of infrastructure and energy in ASEAN.
He said the key is to build a strong business model and ensure efficiency from the beginning. What is also essential, he added, is to find an adequate link between China’s Silk Road initiative and the global market.
“The New Silk Road facilitates the flow of capital, goods and skills. It can be part of the South-South cooperation strategy (as promoted by the United Nations) for developing countries to help one another,” said Li.
Huang Yiping, an economics professor at the National School of Development at Peking University, added: “My reading of the New Silk Road is that it is a continuous effort of China’s peaceful rise to supplement — not substitute — the existing economy.”
While China has benefited from participation in financial institutions, reforms at bodies such as the International Monetary Fund have been less satisfactory for developing nations.
“The New Silk Road and other funding initiatives are ways for China to use its experience to supplement existing institutions,” Huang said. “And the Chinese experience is: In order to get rich, get the roads first.”
Lastly, panelists agreed that going by the “Asian way” of consensus, cooperation and understanding would help take forward the Chinese vision of regional integration.
“Make sure that no one dominates the scene and the benefits are equally distributed among shareholders,” said Chen from Hong Kong University.
jennifer@chinadailyhk.com
http://www.chinadailyasia.com/2015-01/23/content_15218083.html