26 June 2014, 19:30

Will Asia be a new center of economic growth?

Will Asia be a new center of economic growth?

Home to almost 60%of global GDP, half the world's population and a growing middle class, Asia leads the way offering great commercial opportunities for investors and business leaders alike. What does it take to be successful in Asia? What is behind Asia's growth and do the benefits of reorienting towards Asia outweigh the risks? Chris Hartwell, presdient of CASE, the Center for Social and Economic Research, gives his analysis and assessment of the Asia-Pacific region to the Voice of Russia.

Part I 

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Part II 

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What is your take on Asia’s booming economic growth?

Chris Hartwell: There is no doubt that Asia is growing and it is also accumulating wealth. An important distinction to make is economic growth at a country level, looking at GDP per capita growth and wealth accumulation. There is no doubt that Asia is booming in terms of its millionaires. It is going to surpass the US and Germany this year, I think. And we are going to see a concentration of millionaires in China mostly. I mean, let’s be frank, it is China. It is not going to be Japan, not Vietnam, it is definitely not Thailand, it is not Burma. It is going to be China.

Is there any specific reason for China becoming the center of wealth accumulation?

Chris Hartwell: It is because China has had a robust economic growth at the country level for the past 15-20 years. And the real reason behind this isn’t just the fact that China is doing well economically, it is because of the monetary policy in the US and Europe.

It is not easy to do business with Asia, you have to have local knowledge. What are the potential hurdles that the investors may come across?

Chris Hartwell: For the western Europeans, for the Russians, for the Americans obviously the cultural differences. It is really a difficult society to communicate in, if you don’t know the Chinese. Given its political stratification, it is really done a lot on connections, on contacts, on networks.

So, you really need to have that local knowledge or if, at least, you are an outside investor, you need to know someone on the inside. It is high risk, it is high return. China is still nominally communist, you can still have things expropriated at any time. There are no secure property rights.

Thailand obviously has issues with its own political stability, but economically it is still fairly stable. Vietnam is also a communist country, but that’s gone capitalist. Politically stable, but you still kind of subject to those political whims. And it differs by every country.

So, Asia is very diverse.

Chris Hartwell: Something that people never talk about, when we are talking about wealth and growth is Taiwan, maybe, because so many people don’t recognize it as a country. But it is one of the richest places in the world. It is number 16th in the world in GDP per capita. It has gone so far so fast. It is richer than South Korea. It is becoming a base for millionaires. It is also high risk, I mean, the mainland Chinese can invade in any time, but it has proven itself to be a success story.

If you had only two choices – to invest in Western Europe or to invest in Asia Pacific region – where would you go?

Chris Hartwell: Asia, hands down. Europe is still going through its euro-sclerosis. It is too politically unstable right now to get back to growth.

More countries are looking towards Asia, for example, Russia and the US with the “Asia pivot”. Will there be competition between nations?

Chris Hartwell: I don’t think in the long run it will really make any difference. Russia sees a lot of its growth coming from China it shares such a huge border with. I mean, it makes sense. In terms of the US, the problem is that the pivot to Asia never lasts. We continually pivot towards Asia and we say we are going to make this the focus, but then something happens in Europe, something happens in the ME and we lose interest.

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