Conference Presentation, Panel, Fireside Chat
Risky Business: Understanding Asia's Geopolitical and Societal Uncertainties
Milken InstituteGwen Robinson, Brian Baker, Curtis S. Chin, Seki Obata, Walter Wang, Brendan Connor, Ben Rosen
- China's water crisis, driven by pollution, scarcity, health, and food issues, is projected to become the region's primary social challenge, with solutions anticipated through infrastructure modernization and a 20-to-30-year Private-Public Partnership model for water treatment facilities.
- The ASEAN Economic Community is expected to fully unite 10 nations by the end of the current year, creating opportunities across Southeast Asia while requiring investors to look beyond dominant economies like China and India to avoid missing regional growth.
- Chinese economic growth is forecasted at approximately 6.5% for the coming period, a rate below the official 7% to 7.2% government targets, alongside a transition from export-led to domestic consumption-led growth that faces difficulty due to slower global and domestic expansion.
- Political consolidation under Xi Jinping is predicted to drive nationalism and military assertiveness in China, which carries risks of drawing the U.S. into regional disputes and potential social instability if the government fails to improve living standards.
- Japanese Prime Minister Abe is expected to prioritize domestic popularity by aligning with U.S. preferences, leading to improved Sino-Japanese relations faster than average expectations and dispelling fears of Japanese expansionism, though North Korea's economic desperation is seen as a factor for rational behavior.
- The lack of a developed pan-regional Asian financial market, characterized by small and illiquid bond markets, remains a significant constraint; consequently, countries must attract global capital while individual markets improve operational structures before regional integration can succeed.
- Investors face specific risks from the potential non-joining of the U.S. and Japan in the Asian Infrastructure Investment Bank (AIIB), which could result in being excluded from business opportunities or forced to compete under rules favoring low-cost over quality, unless existing institutions like the World Bank and IMF are restructured.
- Regional geopolitical stability faces threats from potential terrorism and Islamic fundamentalism recruiting from Southeast Asia, political instability in Thailand, and South Korean leaders potentially leveraging external conflicts with China to regain domestic support.
- Japanese monetary policy, specifically the exit strategy from quantitative and quantitative easing (QQE), poses a danger of market volatility if the Bank of Japan diverges from government and investor expectations.
- Asia is not viewed as an inevitable collapse, though governments must address corruption and capital market development to prepare for natural disasters, while companies must assess market-specific risks such as shifting tourism flows in Thailand from Russian to Chinese visitors.