'Caged Tiger: The Transformation of the Asian Financial System' examines the future development of the Asian financial universe and the seismic implications of this shift in the global economic centre of gravity.
ANZ Chief Executive Officer Mike Smith says Asia need a financial revolution to accompany the economic revolution of recent decades. “Continued progress in financial reform, deregulation and opening up to global markets in Asia will be essential to support high levels of economic growth in the region. China is central to this Asian Century scenario,” he says.
“The opportunities this will create across the region are enormous. Asia’s financial institutions will become increasingly important in global finance and Asia will become home to many of the world’s largest financial centres. Shanghai will grow to rival New York as a financial centre. Singapore will increase its importance as a south-east Asian hub. Hong Kong and Tokyo will remain large centres while Seoul, Mumbai and Sydney will all grow strongly.”
Today Europe and the US account for just under half of the world economy while (non-Japan) Asia represents just 20 per cent. By 2050, Asia is expected to account for around half of the global economy and the US and Europe will fall towards 20 per cent.
We estimate that the region’s financial system could be as large as $US200 trillion by 2030. This would make it about four times the current size of the Asian financial system and more than twice as big as we project the US financial system to be in 2030.
The area with the most significant growth potential is the debt markets. Asia currently has a relatively small bond market, but a viable alternative to bank finance needs to be developed. ANZ projects that the Asian domestic debt (excluding Japan) could be worth around $US80 trillion by 2030 (with China accounting for over half).
Asian equity markets could represent over 40% of global market capitalisation by 2030.
The growth in the size of the Asian financial system will have a wide range of other implications for the global financial system. Some of these include:
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.