The engine for global growth: Asian companies take up the mantle of leadership as they ride the wave of robust economic recovery

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12 November 2010

YOKOHAMA, 12 November 2010 - As Asian companies ride the wave of robust economic recovery in the region, their CEOs have taken up the mantle of leadership and are investing in growth initiatives.

But there are still some short and long-term risks facing Asia-Pacific economies; and the challenge is for the region and the rest of the world to agree to get on the same track together to achieve global recovery.

These are just some of the findings contained in a PwC report The Asian engine for global growth, launched at the APEC CEO Summit 2010 in Yokohama, Japan.

In a special introduction to the report, Dennis Nally, Chairman PricewaterhouseCoopers International, says: “There’s no question that the optimism we felt in January about the global recovery has been dampened by a turnaround that is slower than expected. In North America and Europe, unemployment remains stubbornly high, housing markets are stagnant, and fiscal deficits are raging.

“Yet those developments don’t characterise the entire global business story. Many Asian companies are doing well; riding a robust economic recovery in the region. Over the past few months, my conversations with CEOs have borne out the growing focus on Asia as the source of future growth.”

Growing middle class of consumers

Mr Nally adds: “With a growing middle class of consumers in Asia, new opportunities will bloom in a variety of sectors, from consumer electronics to natural resources. APEC plays an essential role in making sure trade and economic policies in Asia translate the strong economic recovery in the region into sustainable growth globally.”

The report highlights that economic growth in the Asia-Pacific region is being driven by the powerful momentum generated by China and the ASEAN economies. China is projected to grow 9.3% in 2011, while the six largest countries of ASEAN are forecast to grow between 4.3% and 7.1%. Even Japan’s forecast 1.7% growth is more than twice the average growth rate over the years 1992-2009.

Economic fundamentals - such as high savings, restrained public spending and effective government policies - have made most economies in Asia-Pacific resilient and dynamic.

But to maintain their momentum, they need to address short-term risks and longer-term constraints on growth. The risks include:

  • Large capital inflows could fuel inflation, generate asset bubbles and put pressure on exchange rates
  • Trade protectionism - export powerhouse countries in Asia-Pacific could face a backlash from their trading partners in the West
  • Asia-Pacific is not entirely immune to external financial shocks, such as the risk of renewed financial panic caused by the debt crisis in the Eurozone.

Longer-term challenges for Asia-Pacific countries are more daunting:

  • Their export-dependent growth model has to change as part of the global economic re-balancing process
  • After the successful accumulation of physical capital, the region might now need to boost productivity and build growth on knowledge and innovation.

Fragile recovery

The report concludes that the more Asia-Pacific’s economic clout grows, the more attention there will be on its integration in global economic governance. “It is hard to imagine that the world will regain its pre-crisis prosperity without leadership from the rising economic stars in Asia-Pacific.

“But Asia-Pacific can’t lead the world through a fragile recovery by itself; the region and the rest of the world have to agree to get on the same track together.”




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