Alt+0 to show this section, Tab to navigate forward, Shift+Tab key to navigate backward, Enter to access link, and Esc to reset

Press tab key to access skip links section. Press Alt+0 to access it anytime.
Menu

31 May 2012

Asia's lessons for the eurozone

HSBC’s role in international trade

Problems in eurozone countries such as Spain are similar to those in Asia in the 1990s

Stuart Gulliver used a keynote speech in Hong Kong to argue that the shifting balance of economic power towards the faster-growing markets was creating a new leadership role for Asia and that Asian economies already have a lot to teach the West.

Recalling his experiences during the Asian crisis of 1997, Mr Gulliver contrasted the different paths taken by Europe and Asia after the crisis. Just as Asia was learning the lessons of avoiding bubbles and holding large FX reserves, many Western economies were walking into trouble, with debt-to-GDP ratios climbing to unsustainable levels.

Learning from the mistakes of the past is the best firewall we have to ensure they are not repeated. And this is an area where Europe should take its lead
from Asia

Stuart Gulliver

He went on to argue that the stresses in the eurozone today are strikingly similar to those caused by the dollar-peg in Malaysia, Thailand and Indonesia in the '90s.

"Those economies suffered from an inappropriate, inflexible peg, which created capital inflows that were ultimately unsustainable. This is exactly the unwinding which we're seeing in Greece and Spain today. In both of these examples the lessons of the Asian crisis, of building up excessive leverage and inflexible exchange rates, were not learned. As a result, Europe is having an emerging markets crisis," Mr Gulliver said.

The lessons of 1997 remain important, Mr Gulliver explained. Since 2007 the US Federal Reserve, the Bank of England, the European Central Bank and the Bank of Japan have expanded their balance sheets by more than USD5 trillion. Inevitably this liquidity will look to the faster-growing markets in search of greater yield.

But Mr Gulliver said that by and large the evidence is that Asian markets have learned the lessons of 1997 and are ready to protect their domestic economies from asset bubbles and over-leveraging, while striking a balance to remain open to global trade and capital and all the benefits that globalisation has delivered in the past decade.

He went on to say: "As Asia enjoys superior growth, it will increasingly attract risks such as this glut of cheap liquidity. Learning from the mistakes of the past is the best firewall we have to ensure they are not repeated. And this is an area where Europe should take its lead from Asia."

Mr Gulliver was speaking as the guest of honour at the inaugural annual forum of the Fung Global Institute, at the Conrad Hotel, Hong Kong.

Related content

AGM: HSBC's Group Chairman and CEO update shareholders

25 May 2012

More than 450 HSBC shareholders learned about the bank's achievements and…