The US-China trade war and rising global borrowing costs have brought headwinds more formidable than those during the two financial crises that hit Asia in the past two decades, according to the head of Asian Infrastructure Investment Bank (AIIB).
Beijing and Asian governments must take measures to deal with the impact that has yet to fully reveal itself, Jin Liqun, the president of the Beijing-based multilateral development bank backed by 87 member countries and territories, told the FT-AIIB Summit in Hong Kong on Tuesday.
“I am concerned [about] the possible impact on member countries, particularly those in Asia that are major trading partners of China,” said the former Chinese Vice-Minister of Finance, asked how the trade war has impacted his work at AIIB.
“It is probably still too soon to see the full impact ... I appeal to the Chinese government to take effective measures ... so that the pressure on neighbouring countries will be eased.”
As US monetary and economic policies have major implications for countries in the rest of the world, Jin said sustainability of strong US economic growth is key to the economic health of many Asian nations that are major exporters to the world’s largest economy.
He is particularly worried about the rapid depreciation of the currencies of Asia’s emerging economies as a result of heightened global geopolitical and macroeconomic risks, and tightening monetary policies in the US, Europe and Japan.
It is important for member nations to get better at adjusting their macroeconomic policies to deal with the headwinds
Jin Liqun, president, AIIB
Their weaker currencies do not necessarily bring about stronger exports, but has made their imports more expensive, resulting in a worsened balance of trade position, he noted.
“We certainly hope the trade war will die out soon, but this is independent of our will ... the best way to respond is to do something individually in each economy to help ease the pressure.
“It is [therefore] important for member nations to get better at adjusting their macroeconomic policies to deal with the headwinds,” he said, emphasising he was speaking as an “international civil servant” and not from a China-only perspective.
He urged countries to take actions to control debt, but at the same time allocate sufficient resources for infrastructure construction to ensure sustainable, long term economic development.
The former chairman of sovereign wealth fund manager China International Capital Corporation, and former vice-president of the Asian Development Bank, said the volatile and uncertain global economic situation is “probably tougher than anytime that we have experienced anytime in recent years”.
After the Asia global financial crisis two decades ago and the global financial crisis which emerged a decade ago from the selling of overly-complicated financially-engineered investment products in western economies, the global economy was able to recover after joint efforts by governments, he noted.
“But this time it is more difficult, because we know [this downturn] is not just a natural business cycle, but [was also caused by] policies pursued by some governments,” he said. “It is harder to predict the outcome.”
China-led AIIB was founded in January 2016, as part of President Xi Jinping’s Belt and Road Initiative aimed at fostering closer economic ties with other parts of Asia, Europe and Africa, and as an alternative to the European-led International Monetary Fund and the US-led World Bank.
It had made US$4.22 billion of investment in projects and funds by the end of last year – of which US$566 million were co-financed with private enterprises – up from US$1.69 billion a year earlier, according to its annual report.
Some 73 per cent of the 15 projects approved last year were co-financed with other multilateral development banks.
It now employs close to 200 staff from 40 nations, up from 131 at the end of last year.
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