TOKYO -- Asia's economies will continue to grow steadily in the future, Asian Development Bank President Takehiko Nakao said Wednesday, arguing they are strong enough to weather a slowdown in China.
Speaking at a hotel in Kanagawa Prefecture, southwest of Tokyo, Nakao said that although turbulence in China has created volatility in global financial markets for the past few weeks, he is "not pessimistic" about Asia, including China. "The turmoil will not be a crucial turning point for Asia's future growth," he said.
China's economic growth is becoming more focused on the domestic service sector than on exports. Nakao said with the shift, China's economy will be based on more stable fundamentals. In light of the yuan's previous uptrend in the currency market, the recent "depreciation of the Chinese yuan is in line with actual conditions in the Chinese economy." With consumer activity still robust and the domestic service sector growing, Nakao stressed China's current market declines will not lead to economic stagnation similar to what Japan experienced in the 1990s.
Here to help
China "is very eager to maintain a relationship with the ADB in order to steer its economic reforms," in terms of both funding and advice, Nakao said. At the same time, lending to China benefits the ADB. Nakao said the development bank will continue to have a supportive relationship with the country because "financing China, which has high credibility, is important to balance our portfolio. It is an efficient tool to strengthen the ADB, and to support other Asian countries' growth," he said.
Asia is forecast to account for around 50% of global economic output by 2050, which means it has "enough strength to ensure future growth," Nakao said, given the region's productivity and provided it makes the proper reforms.
In all, Asia is estimated to require $8 trillion in infrastructure investment between 2010 and 2020. Its importance is something both the ADB and the China-led Asian Infrastructure Investment Bank understand. "There is no alternative for the ADB but to cooperate with the AIIB," Nakao said.
Although much remains about how the AIIB will operate, there are important differences in the structures of the two banks. The AIIB aims to run as a relatively small, efficient organization, while the ADB has its international board members stationed at its Manila headquarters to facilitate face-to-face communication. "Both banks can enhance our strengths through our differences," Nakao said.
Speaking on future projects, Nakao said the ADB wants to foster the development of cross-border infrastructure in areas such as the Mekong region and Central Asia.