Australia: China, India changing world economy
Updated: 2011-04-14 10:09
SYDNEY - The world economy's center of gravity is shifting rapidly to Asia, which will soon rival Wall Street as a source of routine market signals, Australia's central bank chief said Thursday.
Stevens also said that finding solutions to imbalances in the global economy is being hampered by focusing too much on the United States' trade deficit with China.
Stevens, whose nation was one of few developed economies to escape recession during the global financial crisis thanks largely to Chinese demand for Australian minerals, is a close observer of China's emergence as an economic power.
"The rise of China, and very likely India, is a transformative event for the global economy," the Reserve Bank of Australia governor said.
"Unless something pretty major goes wrong, we are likely to see much more of this trend for quite a long time yet," he said.
In the 20 years since 1990, the United States' share of the world's gross domestic product has shrunk from about 25 percent to 20 percent, and the figures were similar for Europe, Stevens told the American Australian Association in a speech delivered in New York.
In the same period, Asia's share of global GDP had risen from 25 percent to about 33 percent, led by China, whose current 13 percent is rising and likely to surpass Europe within five years and approach the U.S. chunk within a decade, he said.
Asia's share of the world's financial assets is also growing, again led by China, where economic growth has helped make China the world's largest saver, with an estimated $3.2 trillion in deposits, and its largest investor, with an estimated $2.9 trillion gross investment in 2010.
Other Asian nations have also shown solid growth in the past two decades, and trade relationships between countries within the region were growing in importance compared to relationships with Europe and the United States. Stevens noted that China was now the most important trading partner for the wealthiest Asia-Pacific countries of Japan, South Korea and Australia.
"It is not just the center of gravity of economic activity that is shifting to Asia _ the weight of financial assets is also shifting," he said.
Increasingly, Asia will join Wall Street and the Euro region as a driver of global markets.
"As the Asian region becomes more integrated economically, with an ever larger Chinese and Indian economic mass at the core, and as the accretion of Asian financial wealth assumes increasing global significance, Asia is likely more often to be a source of 'shocks' for the global economy and financial system," Stevens said.
Substantial policy differences exist between Asia and Western economies, particularly on capital flows and exchange rate systems, and resolving them depends on finding ways to accommodate both sides, Stevens said.
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