Shanghai will rival New York as a financial centre in the next 15 years and Sydney will be sucked along for the ride as Asian markets outgrow the US and Europe, according to an ANZ report on the region’s financial industry.
An ANZ Bank insight report, Caged Tiger: The Transformation of the Asian Financial System, argues the rapid development of markets in Asia will become critical to support high levels of economic growth.
ANZ CEO Mike Smith said says the report makes it clear Asia now requires a financial revolution to accompany the economic revolution in recent decades.
“The opportunities this will create across the region are enormous,” Mr Smith will tell a media conference in Hong Kong later today.
“Asia’s financial institutions will become increasingly important in global finance and Asia will become home to many of the world’s largest financial centres.
“Shanghai will grow to rival New York as a financial centre. Singapore will increase its importance as a south-east Asian hub. Hong Kong and Tokyo will remain large centres while Seoul, Mumbai and Sydney will all grow strongly.”
The Asian financial system is on track to be bigger than the US and Europe combined by 2030, according to the report:
- Asian (excluding Japan) bond markets are projected to grow by six times their current size over the next 15 years to match the size of US debt markets.
- Equity market capitalisation across Asia (excluding Japan) is also expected to rise dramatically, from $US9 trillion to almost $US55 trillion by 2030.
- China will account for around half of Asia’s financial assets by 2050.
- The China RMB currency will dominate in Asia and become a genuine rival to the US dollar as a global reserve currency.
- Financial liberalisation in China will see a significant increase in capital flows with Chinese outbound foreign direct investment rising to as much as $US9.5 trillion by 2030.
ANZ Chief Economist Warren Hogan expects Chinese foreign direct investment could rise from around $US500 billion in 2012 to around $US9.5 trillion by 2030.
The US and Europe will receive less of China’s outward investment with Chinese FDI increasingly favouring Asia Pacific markets.
In 2010 around 2.5% of the value of China’s investment was in Australia. Even if that percentage remains unchanged, the stock of Chinese investment into Australia could be worth up to $200 billion by 2030.