‘World Won’t Be Affected By US Woes’
By Ben Ng

Bandar Seri Begawan - Despite speculations that the United States is in the midst of a recession, changing consumption patterns and shifting capital markets will allow the rest of the world to continue to grow, following the rapidly increasing momentum from Asian and Middle Eastern markets. HSBC Holdings Group Chairman Stephen Green, who joined "the world's local bank" in 1982, reiterated this during roundtable discussions on Saturday, during which he shared his outlook on the global economy as well as opportunities, challenges and implications in the region.

He hoped to raise issues accompanying speculations of recession in the US, and the effects of a recession on the global economy.

"Not a day goes by that there isn't an article in the newspapers speculating on whether a US recession will happen and its significance," said Green.

He believed two major trends are affecting the world.

"First is the growth of emerging markets relative to the... markets. We almost overlook the sheer significance of it. The emerging markets account for about 40 per cent of the world's GDP at the moment. Ten years ago, they probably accounted for about 30-35 per cent," he said.

Green stated that recent forecasts show the emerging markets will account for at least half the world's output in the next 10 years, and that more than half of the world growth is already coming from emerging markets.

"The second trend is no less important; it's been intact since the war actually, and that is, the world trade is growing faster than the world's GDP. Virtually without interruption, trade is driving world growth, and I believe it will continue to do so."

He also said recent years have seen what only can be described as an extraordinary 'transformation, especially Asia, adding that Asia is claiming its place on the world economic stage.

"We all know about the phenomenon in China, and the almost dramatic phenomenon in India. It is interesting to reflect on the history.

"In the year 1820... a country's economy as a share of the world's total economy was in proportion to its population as a share of the world's population.

"In 1820, China had the largest economy, with India being the second largest.

"The US economy made up one per cent of the world's economy," he said.

Green felt that the advent of the Industrial Revolution, which extended its arm into the 20th century, resulted in a discrepancy that grew between the countries' income per head and their shares of the world's total population.

"This was started by the Europeans and rapidly spread to America, which was a great phenomenon in the later part of the 19th century. "A series of countries became much richer. So you have the developed economies accounting for about half the world's output, even though they made up less than 20 per cent of the world's population.

"What's happening now is that it is going to reverse again. And the great countries of the world - China, India, Vietnam and other Asian countries - are returning to the world stage again, as the centre of economic grounding shifts away from the West, towards a much more balanced economic pattern across the globe," he said.

Green believed such trend is a great political and economic event of the first half of this century.

"I think the best assumption is that the producers of the world are going to go on growing quite rapidly for the next generation.

"I think the Chinese, the Indian are intact for the rest of our working careers, and possibly beyond, into those of our children. I think Asia is taking its place on the world stage," he said.

Oil at US$100 per barrel was though inconceivable five years ago, he said, adding that the days of oil dropping back to US$20, US$30 or US$40 a barrel are gone.

"And it's not just oil. Look at Brazil. It has become the great exporter of the world. Its trade with China has grown 600 per cent in the last five or six years. So, you can see a pattern spreading to the emerging markets of the world."

The consumption patterns of the world, he said, have become less dependent on the United States, and more on other countries.

"The big question... is we in midst of a financial crisis... with a US recession? Is there sufficient demand in other parts of the world to offset the effects of a US recession?

"Ten years ago, a US recession was a very bad news for the world economy. When America sneezed, the rest of the world would catch influenza," he said.

"The world is a little more balanced now, and I think there is more momentum in the domestic markets of other countries.

“There is a better chance of the world economy withstanding the impacts of a US recession, as was the case 10 years ago.

"For example, the portion of China's economy, in the form of exports to the US, is larger now than it was 10 years ago.

"So, the impact on Chinese growth of a sustained American recession wouldn't be there.

"What is true, however, is that there is more potential now than there was 10 years ago to grow domestic demand in China, and therefore to offset the effect of (a recession)," he said.

"What is true, however, is that there is more potential now than there was 10 years ago to grow domestic demand in China, and therefore to offset the effect of (a recession)," he said.

"I think the best assumption is, if there were a US recession, the world would continue to grow... perhaps a little less rapid than it has in recent years. But nevertheless, there would be a continuous momentum in Asia and Middle East."

He also believed tourism is among the sector that is going to benefit from Asian growth.

"Energy is obviously going to benefit from Asian growth. Financial services around this part of the world are going to benefit from Asian growth.

"The capital markets, which have been so long been run by London and New York, are going to shift their centre of gravity eastwards, and we're inevitably going to see more and more investments coming from Asian and Middle Eastern sources into the Western markets, the real estate markets and the equity markets," he said.

He also said, "This is the early days of an immensely exciting pattern of capital investment, where the traditionally rich countries are actually going to see capital coming from so many different sources and so many different places.

"Another way of putting it is that globalisation is still in its early stages. We live in the first part of a century that is going to be very exciting. -- Courtesy of Borneo Bulletin

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