09/11/2013 Talking Business with Linda Yueh

Now on BBC News, Linda Yueh explores the roles of Asia, America and

Europe in the global economy in Talking Business.

Is the Asian century already over before it has begun? Will America's

power remain unchallenged? And will Europe be a significant player?

Plus, what does this all mean for your money? I am Linda Yueh and we

are Talking Business. If Europe dominated the 19th century

and the 20th belonged to America, then Will this be Asia's moment?

Asia's remarkable growth in the past few years may lead the region to

dominate the economy. Or at least that is one version. But can we ever

count out the United States, which remains the most important economy

in the world? And where does Europe stand? Joining me to talk about who

the 21st`century belongs to our Antony Phillipson, British High

Commissioner to Singapore. He is here to give us the UK and European

perspective. Stephen Groff, vice president at the Asian Development

Bank, has argued that the demise of the US is overblown. And's, Dean of

public policy at the National University of Singapore, known for

calling the past two centuries of Western domination a major

aberration. `` Kishore Mahbubani. I have to start with you on that, a

major historical aberration. Do elaborate. Is it really all about

Asia? It is very simple. If you look at history of the past 2000 years,

from year one to your 1820, for the past 2000 years, the two largest

economies in the world have always been China and India. It is only the

19th century that Europe took off. The 20th century, American attack.

If you view the past 200 years against the previous 2000, it is

very clear that the past 200 years have been a major historical

aberration. As you know, all historical aberration is come to a

natural end. We should not be surprised. But say, yes, this is a

return to the norm and the 21st`century will be the Asian

century. Return to the norm? Well, I agree entirely with Kishore

Mahbubani. If you look until the industrial revolution, the biggest

economies were in Asia. One thing we have to be careful of, whilst this

could be the Asian century, and by 2050, as our research indicates, we

could see Asia taking about 50% of global GDP. There are fairly strong

assumptions built into the mantle, including that we would have to see

growth continue as it has over the last couple of decades. We would

have to seek an avoidance of a middle`income trap, with the major

economies in the region. We would have to see a management of some of

the risks associated with climate change and environmental

degradation. Equally importantly, there is a huge inequality challenge

that the region faces in respect to how well distributed economic growth

has been. So, these things have to fall into place for realising these

very possible projections for Asia. Europe was a power once. Will it be

significant in the 21st`century as the US and Asia start to battle for

supremacy? The point I would make at the outset is that it's not just

about the size of economy. I do not dispute those figures, I have always

felt the rise of Asia now is not the rise from nothing, it is a

rebalancing of trade towards Asia, which is where trade was for the

first 10,000 years. But if you want to look at the influence in the

world, if we want to look up values, democracy, the other measures on if

a country is influential and if a continent is go to dominate, I don't

think Asia will dominate the 21st`century. I think it will be

hugely influential. But I think the Americas, North and South, will be

as well. And I think Europe still has an important part to play. What

do you have to say to that? I don't disagree fundamentally with Steve

Waugh and funny. `` Steve or Anthony. There are huge challenges

that Asia faces. You also cannot deny how fast Asia is coming back.

I'll give you one statistic. In 1980, in purchasing power parity

terms, the United States share of global GDP was 29%. China's share

was 2.2%. Less than 10% that of the United States. Come 2017, three

years from now, the United States's share is going to go down to 17.6%.

China's share will have risen to 18%. That is a remarkable thing. We

are talking about 32, 34, 35 years. An economy that was one tenth the

size of the United States is becoming bigger than the United

States. Something very powerful is happening, on a scale that we have

never before seen in human history. So, it is important to emphasise

that what is happening in Asia today is unprecedented. It may slow down,

but the trajectory cannot be changed. I agree what we have seen

is unprecedented. I agree with the notion that what we are seeing is

nothing short of miraculous. At the same time, another statistics that

adds to your point, is that we have seen poverty rates fall dramatically

during that period of time. Again, that is an incredible achievement

for the region. But we have also seen inequality rise during that

same period of time. We have seen the measures of inequality in these

countries increase astronomically. Had we held steady inequality during

the same period of time, some 250 million additional people would have

been lifted out of poverty during the same time frame. I think the

challenge for the region is one of continuing along this growth path,

which is critical, for this to be the engine of growth for the global

economy. At the same time, we need to address this issue of inequality

and we need to address this issue of environmental degradation, which has

been driving to an extent this growth. I don't disagree with

anything said, but I think, you're absolutely right, the pace of change

been absolutely startling, it is relentless, to some people it is

terrifying. But the drives of that change are unique. It is the

internet, it is the power of social media, the power of communications.

We all know those. But this is not going to be a world in which Asia

alone can dominate and exist. Asia is going to need Europe. Asia is

going to need markets. Asia will need the US. The relationship

between Asia and, if you boil it down, China and the US, is one of

the most important in the world. It is about interconnectedness. We are

not going to live in a world where one continent or region can dominate

the rest. But you do think it will be the Asian century. Or do you

accept and funny's point? I suspect you want me to be slightly

provocative. I completely agree, yes, it is a mistake to write of

America. It is a mistake to write of Europe. From the Asian point of

view, Asians want to see a strong America and they want to see a

strong Europe. That is very clear. At the same time, I am throwing out

statistics, but let's illustrate the pace of change. Anthony mentioned

markets. That is about the number of middle`class consumers you have. In

Asia today, all of Asia, from West Asia to East Asia, the total size of

the middle classes about 500 million people. Come 2020, only six or seven

years from now, that number is going to explode from 500 million to 1.75

billion, an increase of three and a half times. The world has seen

nothing like this at all. I go to many conferences, I meet the CEOs, I

talked to the board. What they do with each of their businesses,

whether it is in chemicals, energy, toys, they do sales projections. And

they show very clearly that all of the new markets are in Asia. That is

why all of the big companies are moving over here. Let me just be

slightly provocative on Europe. Let me say something about Angela

Merkel. She captured the challenge Europe faces in one sentence. She

said, Europe has got 7% of the world's population. 25% of the

world's GNP. And 60% of the world's social spending. If you do the

maths, this is not sustainable. Anthony, the maths, it is not

sustainable? I would not say anybody in Europe thinks it is sustainable.

There is acceptance across Europe that we need reform. Believe me,

Angela Merkel, David Cameron, other European leaders, they know Europe

needs reforming. I would go back to the point, and one other point, this

is not a 0`sum game. It's not a seesaw, Asia is up, Europe is down.

It is a global economy that needs to keep growing for all of us. I

believe Asia will be a major driver of growth, but I think the US will

as well. If they can address these systemic social spending problems. I

think the mantra of the coming century needs to be shared

prosperity. This has got to be the direction we're heading in. Your

point about the middle classes is critically important for the region.

We project that you could see an increase in consumption of 9% per

annum and we now on 2030. That is huge. It will be a great driver of

growth. At the same time, the market turbulence we have seen with just

the threat of a tapering off quantitive easing in the US has

underscored some of the deep economic challenges and structural

transformation challenges that exist in the Major economies of the region

as well. This interdependence across the world, the kind of cooperation

that will be necessary to see an Asian century, a century of shared

prosperity, it is critical that Asia has a lot of housekeeping to do. I

want to make a point about influence. Even if we can accept

that Asia can rise and the US might be able to sort out its problems,

what about influence? This soft power, is there the equivalent of

Asian influence that can match what America has been in the world? If

you look at history, when you look at the changes happening, the first

stage is economic growth. After the, growth, after you have middle class

is emerging, after surplus wealth, it is followed by a culture in ``

cultural renaissance. I'm confident that not just one but many cultural

renaissance is going to appear in Asia, just through the sheer Kim

Little well. `` the sheer accumulation of wealth. China has a

rich historical past and it is very powerful. I have been in Beijing and

Shanghai in the past few weeks. You can feel the desire. They say, hey,

we have a great history, too. You are nodding along there. That's the

important point. It is with `` the most important and exciting thing

about Asia. There is going to need to be the same power of innovation

and creativity and bottom`up cultural input that I would argue we

have had in Europe, and we will not lose, by the way. Also, what we are

also going to have, we go to to have Asian influence. The challenges the

world faces today cannot be addressed by just the US or just the

EU. They have to be addressed by the nations of the world coming

together. This is a point you make in your latest book. The world is

converging with global challenges. It is scattering at the individual

level, which is a challenge. We can't deal with resource carers ``

scarcity of Asia is not engaged. That is why the UK and other nations

have been pushing to update the global architecture that we created

after World War II, that is now sometimes not fit for purpose. That

is why the G8 became the G20. You have talked about the Asian

century, the multipolar world. Here's a question that really

reveals to me what your true preferences are. What languages are

your children learning? My children are learning English and Mandarin,

although I am I worth `` wife are Chinese. Image and Mandarin, and one

of them wants to learn Spanish. `` English. English and Mandarin, and

French. We are out of time. That was interesting. I think the jury is

going to be out as to whether there is this cultural renaissance or if

there are challenges to make it harder for Asia to dominate. Thank

you all very much indeed. Again, thanks to my panel. This debate is

likely to be further fuelled by the current turmoil that politics is

befitting on the US economy. Despite economic worries, money continues to

flow to the US. This by the concerns over the Fed and the debacle over

the debt ceiling, markets have more than we done it. `` despite

concerns. If you put money in US stocks five years ago, at the height

of the crisis, you would have doubled your money by now. Asia may

be garnering the headlines, but Asian equity would have yielded an

87% return, slightly less spent the `` the US. That is better than the

EU, where we would only see a 28% rise. The Dax has recently hit

record highs. Is the US the right place to be? Joining me are

Catherine Young and the chief investment officer at Finaport.

Welcome to the show to both of you. Catherine, Asian equities would have

learned less than American ones had you put your money in their five

years ago. Do you think age is the right place to put your money? It is

about diversification. Fidelity fund managers `` managers in Asia believe

Asia is the future growth engine. In Asia, the rise of demand, and a

growing market share... Is Asia the place you are going to see the most

growth potential? Clearly. Asia is the growth engine of the world.

China is becoming the largest economy in the world. It does not

mean that in the near term, six months, you have to put more weight

on Asia. There are other factors driving equity markets today. Such

as? Central banks are left, right and Centre in all of this. We have

cogitated easing. `` quantitative easing. We had QE1, which was

introduced to fight a financial meltdown, now we are acutely or key

for. `` Keith Reed or key for. Are you missing this wave? Now is a

good time to get into Asia. The US stock market is doing well. Asian

equities are seen to be risky. When investors get nervous, they pull

money out of this part of the world. As he mentioned, you are seeing a

lot of central bank policies and the printing of money offshore. In Asia,

one of the best things to happen with the Asian currency crisis.

Today, balance sheets across Asia are very healthy. So you think it is

wrong for the Fed... Money should be coming into Asia? Tapering equates

to healthy growth. Hence, global investors will look for growth

assets again. Growth equates to Asia. Asia will benefit. What about

diversification? What about Europe? We like Europe as well. On the

valuation basis, it is more attractive than the US. European

shares have lacked against the US. Even there, you start to see the

peripheral Europe undergoing an adjustment process. The Eurozone has

a positive current account balance. That includes the periphery. Germany

is way ahead of the pack. What is the right allocation across the

world? What would you advise? We have an overweight in Europe and, in

the US and in Japan. I think the weak session in China this week

could send out some particular messages that could be a catalyst

for the Chinese stock market. Hound diversify are you? Chinese equity

only makes up 3% of the global index. It doesn't equate to wear

Chinese in terms of its presence on the global stage being the second

largest economy in the world. Some stage I think there be a

rebalancing. We only have to look at the markets. What do you think about

the Chinese market? Some people worry it could collapse. Look where

it was in 2007. The Chinese market offers good value at the moment.

Valuations are low. There are a lot of expectations in China. Maybe they

are overblown. Overall, we think China is attractively priced. In

Asia, we expect a continuation of this central bank policy. On a

relative basis, the US and Europe are doing better. There is a lot of

volatility, still. We look at it as old China versus new China. I am

going to put one more question to you. You have talked about your

strategy. Where is your money? I have an exposure to Asian equities.

We were talking about the rise of the consumer in the US. I bet a lot

of them are buying Korean branded cars. Your own money. Is it Asian

equity you are banking on? I have about 40% is Asian equities. That is

about correct. I have US equity, I have property of Australia, and some

gold. My biggest overweight is gold. You may jump at me now. A little

bit! I don't know if they are going to turn, but looking two or three

years out, they could have a true subside. You have are the star.

Quite a bit of cash and equities. `` you have are the stuff. Interesting.

Thanks very much. The jury is still out on who will dominate the

21st`century or whether it will not be just one player. The smart money

says keep your options open and your risks diversify. I would like to

thank my panellists. Check out our website in the meantime come and

join us in a sweet formal Talking Business with me, Linda Yueh. ``

join us next week for more Talking Business.

Good evening. After a day where we have seen some rain to the south and

heavy showers further north, things are really quite an encounter

through the night, allowing temperatures to tumble. Most places

will be dry and clear. Still a bit more cloud and rain to come in the

South. Moving through pretty quickly in the first part of the night. We

may