Credit Suisse’s 15th Asian Investment Conference (March 19 – 23) is converging in Hong Kong at a time when the region’s largest economies are beginning to settle into their new role as global players. However, with Asia’s growing influence comes greater exposure to global developments as varied as the European debt crisis, political upheaval in the Middle East, and US presidential politics.
Recently, on the sidelines of the National People’s Congress in Beijing, the governor of China’s central bank, Zhou Xiaochuan, warned that the unstable global economy and in particular the European debt crisis could hamper China’s economic growth.
The comments were a stark reminder that Asia’s embrace of globalization means events in Europe or the United States ripple through Asian economies with more force than ever before. The latest data bear this out, suggesting Chinese economic growth is set to lose steam due to both domestic and international factors. At home a strong local currency and rising salaries may hurt China’s competitiveness, but the world’s second largest economy is feeling international developments even more profoundly, especially Europe’s sovereign debt crisis.
“The biggest uncertainty in the international economic situation, as we all know, is the economic recovery process, especially the European economy and financial market development relating to the euro sovereign debt crisis,” Zhou explained.
Concerns about the price of energy also weigh heavily on Asian economic planners, and both the global economy and energy supplies will be central to discussions at AIC.
Resource-poor Japan has been hit hardest by high-energy costs. A year after the meltdown at the Fukushima Daichi nuclear power plant, the country has idled a majority of its nuclear facilities, forcing it to import record amounts of energy. These imports, along with a strong yen (until its more recent weakening), led the country to post its first annual trade deficit in 30 years last year.
Former Japanese Prime Minister Shinzo Abe will update AIC attendees on the massive reconstruction effort of Japan’s devastated northeast coast. Mr. Abe will also brief attendees on how Japan can return to a path of sustained growth, a path likely to include a strong domestic spending component to make up for its softening exports.
Energy also matters to China. Even with growth down from the breakneck pace set over the last few years, Beijing will need enormous amounts of crude and natural gas to keep its economy humming. Access to these resources is a primary concern for China, shaping both its national security and foreign policy. Energy expert Robert Kaplan will be leading a panel at AIC exploring this quest for energy security and how it is influencing Beijing to pursue new policies, including the development of a blue water navy.
In the US, the upcoming presidential elections could also have a profound relationship on Asia. America’s Asian allies hope the eventual victor will affirm Washington’s military commitments in the region, while China hopes that the next US president will pursue a less proactive policy in the Pacific.
No doubt the investors attending will be looking for better ways of understanding Asia’s growing role in global economics and politics. While there is no crystal ball that can tell us exactly what lies ahead for Asia, it is safe to say Asia’s destiny is now inextricably linked to developments in the rest of the world.