Sunday 31 March 2019

How Asia's Money Flows, Policy They Will Set




Where we are today is really not the place we have always been, by this I mean by reference to Asia's Century. Whilst this is Asia Century that there is no doubt, but it came about through a well oiled cycle. Asia initial growth was a direct result of Western funding, money or a better term investments flowed from the US and Europe directly into the two waves of growth that I refer in a previous mail.  Read here the third wave. 

It's right to say that the US and to some extent Europe kicked this process off in building Japan and Korea up from what were the ashes of the 2nd World War. To some extent the US and European funds continued to flow for the 2nd wave of growth which included Taiwan, Vietnam and later China. At this stage Japan and Korea along with the US and Europe invested their hard-earned savings building what we have today a China that will soon, if it hasn't already will take the number 1 slot for the largest economy. Without this global approach to investment I'm sure this region would have struggled. But of course this was not a one way street, as big corporations were able to leverage cheap labour as the emerging markets emerged.




Of the 3rd wave, this was heavily skewed in favour of investors from the now vibrant North and East Asia. Whilst of course East Asia were funding US and European debt through their purchase of treasuries. The economic cycle continues unabated. The dollar has secured stability and continued as the world's reserve currency. China and Japan are by far the largest holders of US treasuries holding approximately $1 Trillion each a phenomenal amount of debt. Add to this Hong Kong and Taiwan who each have $200 Billion of treasuries, then China conceivably sits on $1.4 Trillion. That's if you subscribe to the 1949 civil war split, which of course you have to as it happened. Chiang Kai-shek, of the Nationalist Party, met with Communist leader Mao Tse-tung in the south-western city of Chongqing, following which the nationalist fled china and established a beachhead across the Taiwan strait.  China have never recognized the break away province and Taiwan have not declared independence.  You could of course argue which belongs to which but to argue two separate countries would perhaps be nebulous, they are akin to North and South Vietnam.  As for US treasuries it's fair to say that 55% of US debt is held by Asian countries, this is all before you consider Asian investment funds in US equity, Japan alone have a further $1 Trillion invested. 

Note: Japan remains Asia’s largest net foreign creditor with more than $3.5 trillion in overseas assets, but with China’s annual surpluses of $1 trillion and foreign exchange reserves of $3 trillion, China is expected to catch up with Japan by 2020. Together, Japan and China hold nearly $7 trillion in foreign assets across foreign currency reserves, portfolio investment, and direct investment. In terms of total FDI stock, China’s nearly $1.4 trillion ranks just ahead of Japan.

As you can see when I refer to this Century as Asia's Century, I not only mean growth belongs to Asia the Century is owned by them lock, stock and barrel, just as the 20th was owned by the US and the 19th was the Brits.

The west should be concerned if they are not willing to seek out new markets. The UK is absorbed in chasing Brexit aligning themselves with an economy that has never been proven, for this will be a handicap as we move through the next few years. 




Asian countries are reducing their desire for Western debt and have chosen instead to invest in Asia, in themselves.  Monies from richer economies are flowing to the South to what is Asia's new factory base Indonesia. Indonesia a country of 260M people with an average factory floor salary one third of China. Indonesia is predicted, by PWC to be the worlds 5th largest economy by 2030. It will have one of the world's largest modern militaries. Indonesia will be a powerful force that will influence policy not just for Asia.  Ignore it if you wish, as one commentator to my blog has said we should ignore this region to reduce our carbon foot print. It's difficult to argue when the logic flows on that level, yet we send our North sea shell fish to Thailand... read that story if you dare it's scary.... read here

Thank you once again for taking the time to read my disjointed ramblings. Any comments you have would be greatly appreciated. Please do follow me.  I try to update on a daily basis. 

Thank you Nigel Saywell-Lee.







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