Asia's Uneasy Maturity
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September 2013 Bulletin Vol. 4 Ed. 8 Global insight on official monetary and financial institutions The need for Asian integration Turkey: the way forward The renminbi and the rupee Citizen rights to sovereign wealth Germany’s elections Asia’s uneasy maturity The strains of growing up Contents The asset manager for a changing world bnpparibas-ip.com International monetary policy Cover story Asia’s uneasy maturity David Marsh 5 Asia’s uneasy maturity We all fall down together Meghnad Desai 8 Korea at the crossroads Woosik Moon 10 As emerging markets around the world Limitations of a new policy fashion Gabriel Stein 12 grapple with the task of adjusting to a gradual withdrawal of the Federal Towards declining central bank influence Colin Robertson 15 Reserve’s monetary stimulus, Asia Markets look for tapering in September Darrell Delamaide 16 in particular faces tough challenges. Despite considerable efforts over the Europe & the euro last decade, Asia needs to redouble initiatives to promote regional Retaining national responsibility Niels Thygesen 18 integration. We highlight the significant task facing the Chinese monetary The European question for Merkel Michael Kaimakliotis 20 authorities over China’s economic Taxation makes the difference Stefan Bielmeier 21 rebalancing, as well as problems German consumers leading Europe Michael Holstein 24 facing other Asian states caught up in US-prompted monetary volatility. Emerging markets Turkey retreating from model status Aslihan Gedik 25 Reliable Ankara dreaming of higher growth David Tonge 26 Opportunities for Brazil and its neighbours Banco Central do Brasil 28 investment Mexico eases oil sector constraints Winston Moore 29 expertise Tasks for Asian leadership OMFIF Report 30 Grappling with global governance Alan Bollard 31 The renminbi and the rupee G. Padmanabhan 32 Progress on Asia internationalisation Jukka Pihlman 34 PARTNER FOR SUCCESS Global financial regulation Responsibility for public investors Angela Cummine 36 Concepts and ciphers down the ages Frits Bolkestein 38 tailored Central bankers in search for employment William Keegan 39 to your local needs Tasks for Asian leadership: OMFIF-National University of Singapore Forum The Lee Kuan Yew School of Public Policy at the National University of Singapore staged a seminar with OMFIF on 12 July, ‘The role of Asia in the global economy’, focused on the tasks for Asian leadership in monetary and financial policy at a time of continued strain in the world economy. Left to right below are Changyong Rhee, Asian Development Bank, Tharman Shanmugaratnam, Deputy Prime Minister and Finance Minister, Singapore, Prof. Kishore Mahbubani, National University of Singapore, and Prof. Niels Thygesen, University of Copenhagen. See p.30-35 for articles on the seminar. BNP Paribas Investment Partners Our network of investment experts will not only lead you to opportunities but will provide you with the critical insights you need to make the most of them. So let’s keep reaching together for new goals now and in the future. Vol. 4 Ed. 8 Investments are subject to market uctuations and the value of investments and the income they generate may go down as well as up and it is possible that investors will not recover 2their www.omfif.orginitial investment. BNP Paribas Investment Partners (BNPP IP) is the global brand name of the BNP Paribas group’s asset management activities. The individual asset management OMFIF Monthly Bulletin: September 2013 3 entities within BNPP IP are speci ed for information purpose only and do not necessarily carry on business in your jurisdiction. For further information, please contact your locally licensed Investment Partners. Letter from the chairman Asia’s uneasy maturity OMFIF High-flying countries brought down to earth Official Monetary and Financial Institutions Forum Promoting dialogue for world finance David Marsh, Chairman One Lyric Square London W6 0NB United Kingdom The Official Monetary and Financial Institutions he OMFIF Monthly Bulletin moves into a new phase this month with a layout revamp that seeks to encapsulate Forum (OMFIF) is an independent globally-operating Submissions Tthe organisation’s growing international reach. For the 41st issue since our establishment in January 2010, we are T: +44 (0)20 3008 5262 launching the first publication with a full-scale cover photograph, part of efforts to upgrade the publication’s visual appeal. F: +44 (0)20 3008 8426 financial think-tank and a platform for confidential exchanges of views between official institutions and And we are devoting more space to the challenges facing emerging markets. These countries are being brought down to www.omfif.org private sector counterparties. Contact the editorial team for earth by domestic imbalances and nervousness about Federal Reserve policy. details on article submissions at Our overriding aim is to enable the private and [email protected]. The tasks facing Asia form the centrepiece of this month’s issue. Asia has forged ahead in the growth stakes and set public sector to learn from each other in different down a marker for economic and political stability. Yet institutional infrastructure lags behind. Europe is enduring a ways, promoting better understanding of the world long period of uncertainty engendered by the most advanced and ambitious form of integration – forming a single Advisory Board economy and higher across-the-board standards. Letters currency. Asian integration, as a series of articles in the September issue underline, has been more honoured in OMFIF’s main areas of focus are economic and acronyms than in applications. Meghnad Desai Chairman, Advisory Board monetary policy, asset management and financial supervision and regulation. Letters provide commentary For the world as a whole, Meghnad Desai looks glumly ahead at what he imagines may be the downturn phase of a John Nugée Frank Scheidig on articles in the previous Kondratieff cycle. Jukka Pihlman extols progress in currency internationalisation, while Alan Bollard explores Asia’s Paola Subacchi OMFIF cooperates with central banks, sovereign month’s edition of the Bulletin. gaps in integration. Woosik Moon unveils Korea’s interest in further globalisation. G. Padmanabhan of the Reserve Songzuo Xiang funds, regulators, debt managers and other public Contact the editorial team for Bank of India explains the contrasting fortunes of the renminbi and the rupee. We have reports on our Brasilia and Deputy Chairmen, Advisory Board and private sector institutions around the world. details on letter submissions at Singapore meetings in June and July. David Tonge and Aslihan Gedik set the scene for OMFIF’s Main Meeting with (See p.22-23 for full details) [email protected]. the Central Bank of Turkey on 5-6 September. Winston Moore looks at landmark oil industry moves in Mexico. Since its inception in January 2010, OMFIF has Management held 130 meetings in 25 host countries with the Niels Thygesen analyses signs of European growth. Michael Kaimakliotis and Stefan Bielmeier describe the political David Marsh, Chairman participation of 150 different official institutions. On the web and economic stakes riding on Germany’s election on 22 September. Gabriel Stein and Colin Robertson examine Michael Lafferty, Deputy Chairman Evelyn Hunter-Jordan, Director latest changes in international central banking behaviour. Darrell Delamaide describes the on-off debate on how John Plender, Director Visit www.omfif.org for member and when the US Federal Reserve will cut back quantitative easing. Angela Cummine shows how some sovereign Sanjay Ujoodia, Chief Financial Officer access to more OMFIF intelligence, funds are trying to become responsible investors. William Keegan provides a sceptical postscript on whether central Edward Longhurst-Pierce, Chief Operating Officer including the weekly commentary, Advisory Board bankers care about unemployment. ■ reports, summaries of discussions OMFIF’s 134-strong Advisory Editorial Team and the full Bulletin archive. Board, chaired by Meghnad David Marsh, Editor Darrell Delamaide, US Editor Desai, provides contributions to Lisa Rahman, Assistant Editor the Bulletin, seminars, and other Liisa Vainio, Head of Communications Warning on possible backlash against China economic liberalisation Sonam Khan, Marketing Coordinator OMFIF activities. See p.22-23 for full details. China’s new government under prime minister Li forthcoming challenges than many other Keqiang, pictured left, faces a potential backlash developing countries in a similar position, in against economic liberalisation efforts from view of China’s current account surplus and Subscription Bulletin powerful Chinese vested interests, according high foreign exchange reserves together with For full subscription details, contact the to an OMFIF report on China’s monetary the Beijing authorities’ policy credibility on world editorial team at: The OMFIF Monthly Bulletin features in-depth and economic transformation published on 3 markets. ■ [email protected] news and commentary on key developments in September. T: +44 (0)20 3008 5262 the financial industry and global capital markets – including changes in banking structures and On full opening of the capital account, China regulatory issues. faces a risk that large capital outflows may cause the renminbi to fall substantially, with the danger The Bulletin reaches a wide audience of readers of a currency crisis, according to the report around the globe including public financial ‘Understanding China’s monetary policy.’