Asian Economies ‘Need Structural Change’

Singaporean PM Lee Hsien Loong singles out China as most in need of reform and “the hardest of all”

The Singapore Prime Minister Lee Hsien Loong has stated at the Second Singapore Summit that Asia’s major economies have “reached a point where existing growth strategies have run their course” and that “major structural change must take place.”

Citing both China and Japan as specific cases, he mentioned that continuing high growth would depend upon leaders of these nations undertaking what would be “painful economic, social and political reforms.” Lee was relatively upbeat about Japan’s prospects, suggesting that Japanese PM Shinzo Abe’s “Abenomics” has changed the mood and discourse of the nation and that the recent awarding of the 2020 Olympics to Tokyo would provide a further boost.

Stating that whether it was enforcing intellectual property rights, developing financial markets or ensuring social safety nets, it was important that governments are active in creating the pre-conditions for markets to operate freely and well. He stated that China’s adjustments would be “the hardest of all, but necessary and overdue” in order to “curb excesses and malpractice, meet rising public expectations for accountability and participation, maintain social order and stability – that is the hardest of all, because there is no road map.”

The Third China Communist Party Plenum is being held this coming November and already it is shaping up to be an event watched carefully by global economists for signs of change. The forum is a traditional platform for the government to announce major policy initiatives and will be scrutinized for the ability of China’s leadership strategy and resolve in being able to carry reforms out.

Lee also mentioned the increasing number of territorial disputes in Asia was alarming and again singled out China as partially responsible. “Territorial disputes have become more difficult and as China continues its rise and military expansion, its friends and partners will hope that the process will be based on equal win-win relations,” he said.

“All Asian countries are also either aging rapidly (China, Japan) or have an abundance of young people (ASEAN, India) who need to be employed and both are challenges that need to be overcome” he stated when mentioning the regional demographics. He concluded by stating that he was confident that Asia would succeed – and in its people who he viewed as “driven, talented, and who want to change the world. It would be presumptuous to think that no Asian country will join the ranks of the developed world in the next 20-30 years.”

“Lee’s words ring true yet also single out China, to the extent that the country must reform or potentially risk being left behind,” comments Chris Devonshire-Ellis, Managing Partner of Dezan Shira & Associates. “Much has been made of the impact of China globally, yet I detect that there is an undercurrent of desire to move ahead in Asia that many nations are starting to develop strategies that exclude China and are not dependent upon it, should the CCP not be able to rise up to its reform challenges. The intellectual thought process of being able to develop Asian economies with minimal reliance on Chinese growth has begun. The message between the lines to China is simple – reform or be left behind. This is quite different from the standard rhetoric that holds that China is vital to Asia’s growth this century. A Plan B if China cannot perform is starting to emerge.”

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