Kim issues Asia plea as China concerns soar
Kim’s comments come as a leading economist said that Chinese growth could hit 3% within the next five years
On Saturday World Bank president Jim Yong Kim issued a direct appeal to the great trading nations of East Asia to pull together as a team, and to avoid falling prey to petty conflicts at a time of high and rising global uncertainty.
“The forces that bind Japan, Korea and China are much stronger than those that pull them apart,” Kim said. “What is needed is more economic cooperation between the three.”
Kim, a Japanese-speaking Korean-American, made his comments as a leading economist said that Chinese growth could hit 3% within the next five years.
The Bank president made his public intervention at the conclusion of the annual IMF meetings in Tokyo, during which regional conflicts again leapt to the fore.
Japan and China have continued to spar all week over the contested Senkaku-Diaoyu islands, claimed by both Tokyo and Beijing. The dispute came to a head when Beijing pulled several high-level delegates out of the event, including People’s Bank of China governor Zhou Xiaochuan and finance minister Xie Xuren.
The friction also comes at a painful time for a region overly reliant on an export-dominated growth model. While south-east Asia, a region more skewed toward private capital and domestic consumption, is booming, the great economies of East Asia are suffering their most protracted economic slowdown in more than a decade. China is on track this year to post its lowest rate of annual GDP growth since 1999.
Rogoff said that growth in China could slow to as little as 3% a year.
“It’s a pretty low probability in the near term but if you’re going over five years, it’s a distinct possibility,” he told Emerging Markets.
“Not really recognizing the magnitude of what a 3% growth year would do to investments, banks and other over stretched parts of the Chinese economy.”
Beijing’s beleaguered leaders, stretched by slowing growth and an upcoming leadership transition that has been anything but seamless, are striving to achieve a transition to a more domestic-focused growth model, but that process, if it is ever completed, is likely to take up to a decade.
Most likely, China will need rapidly to acclimatize to a new era of long-term slower economic growth. “The era of close to double-digit high growth in Asia is coming to an end,” Asian Development Bank chief economist Changyong Rhee told Emerging Markets.
Indeed, China and even India, another BRIC nation slowing markedly following several years of high single-digit growth, are now becoming conduits for shocks to the rest of the region, Rhee said.
This means economies transfer and transmit economic problems created in developing nations to emerging markets throughout Asia and, in the case of China-dependent economies like Peru, Chile and Brazil, far beyond.
Japan’s economy is facing shockwaves of its own. Battered by global economic concerns as well as the fading of the fiscal stimulus ‘pop’ enjoyed in the aftermath of the 2011 tsunami, Japanese corporates are now scaling back production in China as the row over the disputed islands continues to mount.
One of China’s top economic thinkers also voiced his concerns over the country’s economic future. “China needs structural change,” said Li Daokui, professor of economics at Tsinghua University’s School of Economics and Management in Beijing. Li decried overcapacity in everything from iron ore and automobiles to steel wires and real estate.