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mr. chen shuang, ceo of china everbright limited, attends the 2011 boao youth forum


the 2011 boao youth forum was held on 15 september 2011 at the hong kong convention and exhibition centre. the theme this year is “asian economies in remodeling: what we can do”. at the forum, mr. chen shuang, ceo of china everbright limited, delivered a speech titled “asia’s financial recovery and sustainable economic growth – a long and hard road”. the forum was attended by tung chee hwa, vice-chairman of chinese people’s political consultative conference, henry tang, acting chief executive of the hong kong special administrative region, lu xinhua, commissioner of china’s foreign ministry in the hong kong sar, zhou wenzhong, secretary-general of boao forum for asia, and over 1,500 other guests including academicians, officials, corporate leaders, experts and youth representatives from across the asia-pacific region. 
 
speaking at the forum, mr. chen shared his views about the economic and financial development in asia. he drew attention to the us and europe’s excessive transfer of losses to asia. he said asian countries need to change their economic structure by adopting a growth model driven by both exports and domestic consumption, in order to end their reliance on the us and europe. he added that further opening of the financial market, and the internationalization of monetary and financial markets, are key objectives if asia is to achieve sustainable growth. 
 
marking its third anniversary since its debut in 2009, the boao youth forum is jointly organized by the boao forum for asia (bfa) and the y. elites association. it is aimed at helping the youths of hong kong to understand the situation in asia and facilitating youth exchange and communication within the region. the boao youth forum has been regarded as one of the most influential international forums in the region. 

asia’s financial recovery and sustainable economic growth – 
a long and hard road 
(mr. chen shuang’s speech on the boao youth forum, 15 september 2011) 

ladies and gentlemen, 
 
i am honored to be given this opportunity to share my views on the economic and financial development of asia in a globalized world. 
 
in the past 30 years, globalization was the major driving force behind asia’s phenomenal growth. in the new international division of labor, asia has become the world’s factory – provider of labor-intensive processing service in the global supply chain. despite being low value-added and resource-hungry, the processing industry enabled the asian countries, most of which being developing countries, to accumulate vast wealth. however, this kind of export-driven growth is under threat due to the region’s diminishing demographic bonus, falling product competitiveness and rising costs. 
 
the structural unemployment in the us and europe in the wake of the 2008 financial crisis has caused these countries to rethink globalization. protectionism and trade conflict will inevitably escalate, which is detrimental for asian exports. 
 
moreover, the asian countries have little advantage in technology and other core competencies. they remain uncompetitive in high-end manufacturing. 
 
statistically, asia recovered from the financial crisis faster than the us and europe did. asia’s gdp grew 8.8% in 2010 and will likely increase 8.4% in 2011. its total imports and exports will also likely maintain over 30% growth. but while asia has contributed significantly to global economy growth, i think it still relies too much on the us and europe, and is therefore unable to lead the global recovery on its own. 
 
development of the financial industry is inseparable from the economic environment. asia’s economic growth and wealth accumulation over the past three decades have created the conditions necessary for a prosperous financial industry. in particular, the asian financial crisis of 1997 led to strengthened financial regulation across the region. asian countries imported world-class management practices, technologies and talents, and achieved remarkable progress in electronic banking and internet banking. tokyo, hong kong and singapore have become important global financial centers. the time magazine even proposed the “new york-london-hong kong” concept. nevertheless, the us and europe continues to hold sway over asia’s financial industry as a whole. 
 
firstly, there is the hegemony of the us dollar. after the 2008 financial crisis, the us, taking advantage of the dollar’s status as the major international settlement currency, issued vast amounts of money. such policy will keep the dollar devalued and undermine the creditworthiness of us debts. china and japan, as major holders of us debts, suffered heavy losses. the appreciation of home currency, coupled with shrinking demand from the west, caused export decline at many asian countries. 
 
secondly, asia’s financial industry is structurally simple in the sense that it is mainly composed of commercial banks. asia’s capital markets remain led by the us and european investment banks and funds. the region’s financial industry is less globally competitive than its real economy. in asian companies’ participation in the global capital market, the us and european investment banks and funds still dominate areas like rating, financing, product design and sales and m&a. 
 
thirdly, financial innovation in asia is far too insufficient to satisfy the needs of its real economy.

given the above, i believe that if asian countries are to achieve sustainable recovery and growth, they must pay attention to the following issues: 
 
1. the us and europe are excessively passing their losses in the financial crisis to asia. this should be a major concern to the asian countries.
judging from what the us and other major developed countries did after the 2008 financial crisis, they are not doing what is necessary to solve issues like falling productivity and over-consumption in the long-term. instead, they used financial means to pass on their losses. since asian countries are major holders of us and european debts, and given the export-oriented nature of their economies, the so-called quantitative easing has exacerbated asia’s asset bubble and inflation. all these are hurting the region’s economy and nascent recovery. the asian countries must cooperate to contain such situation. 
 
2. asian countries should use the wealth accumulated over the years to change 
the way their economies grow. they need more competitive industries and technologies, and must change from an export-driven economy to one that combinesexports and domestic consumption, in order to shake off their reliance on the us and europe. despite the us and europe’s present economic troubles, their superiority in technological innovation is still intact. once they have recovered, such superiority will be a challenge to asia. 
 
3. asian countries must strengthen their cooperation. the asian financial crisis of 1997 has increased awareness of regional economic cooperation. in recent years, substantial progress has been achieved in regional integration, especially in east asia. the chiang mai initiative, a liquidity support arrangement, is an example.the asean 3 free trade zone is also making good progress. asian politicians need to take a long-term perspective. as the chinese saying goes, “neighbors neararebetter than relatives afar”. as they talk about “the threat of china”, asian countries are already suffering damage. if a major economy of asia is depressed, its neighbors will be directly impacted.
 
4. strengthening financial innovation has become crucial to the sustainability of asia’s economic development. mr. rhee changyong, chief economist of asian development bank, said asia’s weak financial industry is the main hurdle to the region’s long-term development. i believe financial innovation in asia must start with regional financial cooperation. more efforts are needed to promote regional integration, as well as to accelerate resource integration, currency swap, and bilateral/multi-lateral trade and other areas. the major economies of asia should also further open up their markets. governments should promote a more market-driven financial industry, so as to put an end to monopoly. 
 
thank you.