Asia’s contribution to global rebalancing apel_1310 38..51
Cyn-Young Park, Charles Adams, and Hoe Yun Jeong*
Developing Asia remains at the core of global payment imbalances.
While the geographical concentration of current account imbalances is
significant—with the People’s Republic of China accounting for the lion’s
share of the region’s current account surplus—how Asia contributes to
global rebalancing also depends critically on the newly industrialising
economies and larger Association of Southeast Asian Nations economies.
Given the region’s huge diversity, the necessary national macroeconomic
and structural policies will vary significantly across Asia’s emerging
economies. Whereas near-term rebalancing efforts will be driven primarily
by macroeconomic and exchange rate policies, structural reforms
are essential for boosting domestic and regional demand as sources of
economic growth over medium to long-term. We argue that regional
rebalancing will depend critically on the adoption of deeper and more
comprehensive structural reforms and further trade liberalisation to
unlock the potential of strong domestic and regional spending—thus
reducing Asia’s high dependence on extra-regional demand. Priority policies
should include infrastructure spending, competition, trade, financial
development, investment, immigration, and other social policies to reduce
national savings.