Barclays Capital Vice Chairman examines the situation
In the light of the upcoming World Economic Forum in Dalian on 10–12 September, Swiss Style Chairman John Béguin spoke with Sir David Wright, Vice Chairman of Barclays Capital, the investment banking division of Barclays PLC, to discuss the future of Asia Pacific’s economic stance in the world platform and what is to be expected from the imminent forum in China.
Barclays Capital provides risk management, financing and advisory services to corporations, financial institutions and governments, and has extensive global reach and the distribution power to meet the needs of issuers and investors worldwide.
Fluent in Japanese, Sir David, who joined Barclays Capital in January 2003, is based in London and is the firm’s senior relationship adviser with special emphasis on the United Kingdom and Asia-Pacific.
What to look for in Dalian
The highly anticipated World Economic Forum is set to take centre stage in Dalian, with the world feverishly watching. Chinese Prime Minister Wen Jiabao confidently declared that Asians know how to pull up their sleeves and work through any difficulty and, with that said, it is safe to say that expectations are high not only for the success of the upcoming forum but also in terms of what the future holds for China and Asia-Pacific in general.
Sir David will be in Dalian in September and noted that he will be interested primarily in seeing two things from the forum. First of these is how the forum itself will succeed in developing the concept of the New Champions Meetings, in a unique “Asia based” way, and whether or not it will be able to successfully bring forward a sufficient number of different experiences and national issues to the debating forum.
Second, Sir David is interested in the extent to which it is possible for Wen Jiabao’s comments in Dalian pertaining to China’s ability to work through any difficulty to take effect. An advocate of how the Chinese have managed their economy over the last year, particularly in terms of their package to revive the economy, Sir David points out that the Chinese have done so at a time when there is increasing concern in some quarters about what China’s growth will mean. “When one looks at the rest of the region,” he adds, “one finds that the situation it is not pan-regional. Things are different in terms of different geographies.”
Despite this, and with the positive numbers that have come out of China over the past weeks, Sir David points out that China is continuing its global revival in an encouraging manner.
Evolution of Asian economies
While somewhat averse to the idea of “crystal balling” the evolution of Asian economies over the next 18–24 months, Sir David suggests remaining diligently observant in regards to the region’s progression. When asked to discuss various locations in Asia as examples to his point, he notes that with a country such as Indonesia, for example, there does appear to be a healthy prospect due to the size of the country and its abundance of resources, as well as the considerable “natural and human talent which can be tapped.” With regard to Thailand, however, while Sir David is a great believer in the capacities of the Thai people themselves; he remarks that nearly three years after the coup, major internal political problems persist which have implications for Thailand’s near-term growth on the back of fragile consumer and business sentiment.
On a more positive note, the new Prime Minister of Malaysia, Mohamed Najib bin Abdul Razak, seems to understand the changes that need to be made in his country, Sir David explains, and “he appears to be dealing with the issues quite well.”
With regards to Japan, a country with enormous residual strength and financial resources, the future will be determined in part by the upcoming elections, where “for the first time in nearly sixty years, Japan could see a policy shift from a heavily export-driven economy into one focused on more domestic demand,” he adds. Japan provides a lesson, Sir David cautions, on the extent to which a heavily export-driven country is able to sustain itself as a locomotive for economic growth in the next 20 years.
Corporate bond markets
The surge in the corporate bond market, which Sir David dubs a “phenomenon of great importance”, is seeing a radical change in terms of the shift away from traditional bank lending. He comments that while many emerging domestic corporate bond markets are relatively underdeveloped, you only have to look at those countries with a mature domestic corporate bond market to see how these have provided companies with access to new capital resources and provided a major boost in growth in North America and Western Europe.
“We want to be part of Asia’s similar growth trajectory,” Sir David adds. “Barclays is well positioned to play an integral role in the continued development of the corporate bond market in the region. We see great benefit in a fully developed regional bank capital market and its ability to provide a source of sustained, low-cost financing for the region’s borrowers. This potential is supported by not only the large pools of liquidity in the region, but also by the respective governments’ efforts to further develop their local markets.”
Shifting activity and Asian hubs
Sir David acknowledges the possibilities that lie ahead for the Asia-Pacific region and questions the extent to which Western institutions will shift their resources and activity eastward. He believes this shift is important for major institutions such as Barclays and specifically points out Barclays’ increasing resources and platform in Asia-Pacific from Pakistan eastwards in terms of private, corporate and commercial banking.
He adds that the world “cannot underestimate the opportunity, but at the same time should remain active and well-positioned in North America, which Barclays certainly has done with its acquisition of Lehman Brothers, and in Europe.”
In addition, Sir David questions the extent to which we can expect to see some development of financial hubs in Asia. Noting the ongoing competition between places such as Singapore, Hong Kong, Shanghai, Seoul and even Mumbai and Kuala Lumpur, he anticipates that the development of hubs in Asia may take more time and remain an unsolved question for a while longer.