The need to build a new Asian credit system
- By Dominique de Villepin
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E-mail Beijing Review, July 8, 2014
But Asia is becoming the beating heart of the global economy. No one will contest that. Asia has already become the No. 1 economic region in the world. It's the first in terms of output, accounting for over 35 percent of the world's total. It's the fastest-growing region in the world with 7.9 percent growth in 2012. Asia has also become the "world's creditor." It's the region with the highest currency reserves in the world, with countries like China with almost $4 trillion in reserves.
This paradox causes gaps in growth and endangers stability to a great degree. Each year, the level of risks is heightened. There's one simple solution—we all need an Asian credit system.
It must be a fair credit system, based on principles and not on domination. In October 2013, Chinese Premier Li Keqiang, strongly advocated such a new Asian Credit System, making it one of the top priorities for the Asian and the global economy in coming years.
There are several principles during the establishment of a new Asian Credit System.
The first principle is independence and sovereignty. Asian countries have a long history, often a history of wars and tensions that make them—as in Europe—particularly sensitive to issues with respect to their national identities and sovereignties. After the experience of colonization on the continent, after the experience of terrible and cruel wars in the 20th century, independence remains the guarantee of everyone's security and of common stability.
The second principle is diversity. Diversity of the financial environments is a profound reality in a continent with different cultures, languages and religions. One example of this diversity is the case of Islamic finance, which has grown rapidly in the past decade and matches the particular needs of certain societies. This fact is not enough taken into account by the existing system, as has been often underlined by Faheem Ahmad, who heads the Association of Credit Rating Agencies in Asia and the Pakistan-based JCR-VIS Credit Rating Co.
The third principle is solidarity. Asia needs more cooperation in order to grow faster and with more convergence. Today there are several economic and political integration projects that have comparable objectives with sometimes different political points of view.
In a nutshell, it must be an original and efficient credit system, because the regional Asian economy still has to be built up in many of its mechanisms. Intra-zone trade is still much lower in Asia than it is in other regions, like the EU or the North American Free Trade Agreement.
There are five challenges in the face of the new Asian Credit System.
The first challenge is a necessary shift of the economic model in China, from an export-driven global economy toward a regionally integrated domestic consumption economy. The second is the Russian-Chinese partnership that needs to be created to develop the northeast of China and the Far East of Russia. The third is the South Asian integration to stimulate growth in fast-expanding economies. The fourth is to develop all the potential of Asia's relationship with Australia, which is a key economy to Asia and a necessary partner for the future growth of the Asia-Pacific region. The fifth is the development of Northeast Asia. This means a strong dialogue on common interests with Japan. Appeasement will be achieved through economic interdependency. This also means promoting reconciliation between North Korea and South Korea, because this is now the major regional obstacle to growth.
This is an edited excerpt of a speech by former French Prime Minister Dominique de Villepin at the Summit on Construction of Asian Credit System, held by Universal Credit Rating Group, in Beijing on June 23, 2014.
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