Asia

By Gavin Bowring, Asean Confidential

By most accounts, Kyrgyzstan’s Dordoi Bazaar, which lies on the outskirts of the capital Bishkek and just 10km from the border with Kazakhstan, is one of Asia’s largest wholesale and retail markets, directly employing at least 50,000 people, and contributing significantly to Kyrgyzstan’s thriving garment industry, which accounts for an additional 150,000 jobs in a country of 5.8m.

A bewildering labyrinth of stalls and warehouses made from tens of thousands of stacked shipping containers, the market serves primarily as a re-export hub for a wide range of cheap Chinese consumer goods, textiles, and machinery (accounting for roughly 70-80 per cent of sales) to the major neighbouring markets of Kazakhstan, Russia, and Uzbekistan. Read more

By Xiao Qi, China Confidential

China’s shadow finance sector has become a global concern. The International Monetary Fund (IMF) and World Bank have both warned about the risks associated with the rapid build-up of assets within such an opaque sector, while central bankers now regularly reference Chinese shadow finance as a key potential risk to global economic stability.

But while concern over the lurking horrors in China’s financial shadows remains justified, regulatory actions mean that the systemic risks that they pose are finally starting to ebb. This is happening in spite of the fact that the overall scale of the shadow system is continuing to expand. Read more

By Alastair Campbell and W. John Hoffmann, Exceptional Resources Group

“There is no difference between reform and anti-corruption: both must be implemented within the framework of law”.

So said Chinese leader Xi Jinping, and with the end of a high level Communist Party meeting last month, the significance of Xi’s “Rule of Law” campaign has become crystal clear. It is a key tool in his attempt to restructure the framework of Party political power and decision-making via the four new Party central leading groups which he chairs. Read more

Can China innovate its way out of a prolonged economic growth slowdown? Shaun Rein, managing director of the China Market Research Group, believes so. In his new book, “The End of Copycat China – The Rise of Creativity, Innovation and Individualism in Asia”, he argues that China will start innovating now because it has to – and that it didn’t before simply because it didn’t need to. That’s an interesting theory, but is he right?

Rein first does battle with common perceptions that the Chinese political system or culture limits its ability to innovate. It’s not because China is a communist-led country with limited individual freedom, that it does not come up with corporate inventions, he says. Read more

Indonesia’s new president Joko Widodo has kept his election promise to cut subsidies on fuel. He announced that prices will rise by some 30 per cent in order to tackle the government’s ballooning budget and current account deficits, fast FT reports.

Subsidised petrol will rise from Rp6,500 to Rp8,500 ($0.80) a litre while diesel will jump from Rp5,500 to Rp7,500 a litre. Read more

By Kavaljit Singh of Madhyam

After months of stalemate, India and the US have agreed to resolve their differences over food stock holdings, opening the way for future implementation of the Trade Facilitation Agreement at the World Trade Organization – the biggest trade deal in the WTO’s entire history.

The two countries have reportedly agreed that a “peace clause” – which protects member countries that breach farm subsidy caps under the Agreement on Agriculture from being challenged at the WTO – will continue indefinitely until a permanent solution is found. The US agreed to Indian demands to rewrite the peace clause to give adequate protection to such member countries. Read more

On a hot Tuesday afternoon Neha Arora, 32, stands outside an upmarket café in south Mumbai, struggling with two mobile handsets. She complains that her phone calls regularly cut out.

“It’s a way of life, I guess,” the wedding planner says. “You just call back or the other person calls back.” Read more

China’s status as the world’s largest outbound tourism market is in the global spotlight this week after it announced an agreement with the US at the Apec summit to extend the validity of visas for tourists and students between the two countries.

Under the reciprocal agreement, tourists and business travellers between the US and China will now need to re-apply for entry visas just once every 10 years instead of annually under the prior arrangement. The duration of student visas will also be extended from one year to five years. Read more

By Stuart Larkin of the Institute of Southeast Asian Studies

President Barack Obama’s visit to Myanmar this week once again puts a spotlight on the progress of the country’s opening up and political transition. But in a familiar refrain: it’s the economy, stupid.

The Thein Sein government’s lovefest with western donors over ‘Washington consensus’ policies risks intensifying resource-curse dynamics without delivering the infrastructure upgrade that Myanmar needs for labour-intensive manufacturing export competitiveness. Meanwhile, foreign investors struggle with local conditions and the very people who may be able to get big projects off the ground, Myanmar’s own tycoons, are often shunned by their president and precluded from western financing by US blacklisting. Read more

By Christina Ma of Goldman Sachs

China is about to set another milestone in its long journey of financial market liberalisation. The Shanghai-Hong Kong Stock Connect, to be launched on November 17, will for the first time allow international investors to trade shares directly in China’s stock market without applying for an individual quota.

Although the programme will initially cover select stocks listed on the Shanghai exchange, its implications are significant. By providing direct access to the Chinese market, it essentially knocks a hole in the Great Wall that has historically separated shares for domestic investors and shares made available to international investors. More importantly, Stock Connect paves the way for China’s stock market to debut on the stage of international relevance, something that has eluded it despite its massive $4.8tn market capitalisation. Read more

By Louis Kuijs of RBS

China’s economic growth is coming down, trend-wise, but opinions differ widely over how much and how quickly.

In a recent paper, former US Treasury Secretary Larry Summers and his co-author Lant Pritchett argue that, based on global experience, it is more likely for China to “revert to the mean” of 2 per cent GDP growth than to keep growing at relatively high rates.

It makes sense to look at history as a guide to the future. But, what is the right history to look at? Read more

With China’s economy slowing, Japanese companies looking for an alternative to China due to political friction with Tokyo’s larger neighbour and a host of other factors, the Association of Southeast Asian Nations (Asean) has become flavour of the year for some portfolio investors and many companies.

If Asean were a country, the collective gross domestic product of its 10 members – from Myanmar on its western fringe to the Philippines at its easternmost point – would make it the world’s seventh largest economy, ahead of California. With combined gross domestic product of $2.4tn, its economies collectively were 25 per cent larger than that of India in 2013. Read more

“We are waiting for you!” Finance Minister Arun Jaitley told potential investors this week at the India Economic Summit in New Delhi. But the response among delegates in the conference hall may not have been the one he was hoping for.

“We are waiting for him too,” said one foreign investor, who declined to be identified, expressing impatience with the pace of reforms to make India more business-friendly. Some local industrialists struck a similar note: Anand Mahindra, chairman of Mahindra & Mahindra, one of the largest industrial groups in India, couldn’t hide his anticipation: “The pressure is on [the government] to walk the talk, and see the talk become action.” Read more

By Jonathan Fenby, Trusted Sources

Reports of the latest Chinese Communist Party Plenum have made much of a drive by the leadership in Beijing to improve “the rule of law”. If that were the case, it would represent a major positive step in the process of change promised by the previous Plenum in November 2013. Establishing a strong, independent legal system is an essential step in enhancing the rights of individuals and providing a level playing field for companies and investors.

Boosting hopes that this may be on the leadership’s agenda, official Chinese media, along with some investment bank analysts and foreign media commentators, have hailed the Plenum as, in the words of one of the former, “a blueprint for the law of law”. This is playing with words. Read more

International air travelers will recognise the tag line from the HSBC campaign in airports worldwide: “In the future, South-South trade will become norm, not novelty”. If it depends on the Mahindra group and other Indian conglomerates, that tag line could become reality with regards to Africa and India.

Taking optimism to a new level, a collection of African leaders and Indian industrialists dared to dream big during a closed session of the WEF India Economic Summit in Delhi, agreeing to an informal ambition of $500bn Indo-African trade by 2020. Read more