The whole world is dependent on China. It is not just an economy that is manufacturing goods and exporting them, but is also the world’s biggest country, with huge demand for consumer goods and commodities.
With a growth rate of 8%, there is a danger it could overheat. But the country’s policy decision-makers have been very strong in their management of the economy and have a proven track record. I believe they have pulled back on property and stopped overheating in certain regions, and have brought the risk under control.
Suddenly, in 2003, everyone realised China’s immense strategic importance. Its growth has led a number of Asian countries to reflect on whether their strategy should be to compete with China, or to share in this growth. A new trend in Asia is that China’s influence, both politically and economically, is now obvious. It is a new phenomenon; five years ago, everyone talked about Japan.
India maturing quietly
India, meanwhile, has fulfilled its potential. It has grown at more than 5% for the past few years, becoming a centre of excellence for software, technology, call centres and an array of industries. It is quietly and confidently maturing into a very big economy, although not at the same pace as China.
People are unaware of India’s cities apart from the very biggest. Bangalore, Mumbai and Delhi are always mentioned, but places such as high-growth Chennai (where Standard Chartered has a service centre) are forgotten. Yet there are many such cities with huge populations.
It is an absolute certainty that in the next decade China and India will continue to grow strongly – so the challenge for the rest of the world will be how to take advantage of these two economies. Combined, they represent two-fifths of the world’s population; they are powerhouse economies and as they expand, so does the demand for brands, products and so forth.
With regard to credit card growth, the lessons from South Korea’s credit card bubble have already been evidenced in Hong Kong. If you have a credit card spending bubble, without credit bureaus it is very difficult for banks to keep it in check. In our markets, the big change in the past three years is that previously only 15% of our unsecured lending was covered by credit bureaus; now they cover 85% of our unsecured lending in Asia.
The big change is that Asia is an immature consumer debt market. For example we’ve only got mortgages recently in some markets such as India; we’ve only had credit cards in Korea in the past three or four years. So in an immature consumer debt market with high growth rates and increasing spending, the danger is that credit bubbles form. Asian countries have realised that credit bureaus play a critical role in managing this.
Election year
This year will see eight elections take place around Asia. The Asian crisis was the biggest wake-up call that any part of the world has ever had. Now the evolution has become more gradual, so that the various elections expected this year, while significant, will not have a material impact on the region’s development. People have always predicted doom and gloom for Asia, but our view is that its long-term prospects are excellent. This doesn’t mean there won’t be setbacks – but elections and changes of power will not have a material impact.
There is no such thing as “an Asian economy”. All its countries are at different stages of economic evolution and will therefore open their markets and reform at a different pace. However, in the past five years there has been a significant opening up of the Asian banking market and that is likely to continue.
Over the next five to ten years there is no doubt we will be allowed to do more and more, buy 100% of the banks, invest more, in a wide range of countries. Sometimes this happens faster than one expects, sometimes it occurs more slowly – but overall the trend is unstoppable. But the region’s countries should not open up their economies immediately. They are not ready.
