Manila: The Asean+3 (China, Japan and South Korea) countries want a commitment in terms of multilateral trade to maintain trading growth among member states.
The empty hall before the start of the Asean+3 meeting. Erich Parpart
The Asian Development Bank (ADB), meanwhile, denies that the ongoing trade tension between the US and China is a trade war, but the lender commented that any further prolonging of trade restrictions between the two countries could inhibit China's economic growth.
"Member countries can see a clearer global economic recovery, but everyone is starting to be concerned about two or three issues that are currently related to the condition of the global economy," Bank of Thailand governor Veerathai Santiprabhob told Thai reporters after the 21st Asean+3 Finance Ministers and Central Bank Governors Meeting last Friday at the 51st ADB annual meeting in Manila.
Mr Veerathai said Southeast Asian economies are largely dependent on trade and member countries want a "commitment in terms of multilateral trade" among themselves to support the continuation of trading growth.
Stephen Groff, currently the longest-serving ADB vice-president for East Asia, Southeast Asia and the Pacific, said at a separate media briefing earlier in the day that the development bank was "cautiously optimistic" for Asia-Pacific's economic prospects as a whole. ADB forecasts 6% growth for 2018 and 5.9% for 2019.
There are "some newly emerging risks to that outlook", Mr Groff told reporters, regarding "trade restitutions" between the US and China that present "some degree of uncertainty", but "they are not worried that it would have a necessary immediate impact" on Asia-Pacific's economic prospects.
But he pointedly denied that the current trade tension between the US and China is a trade war, as the two sides are still in talks. Nevertheless, a continuation of "restrictions" in trade could hit China's economy and have spillover effects on economies dependent on trade with the mainland.
"In the course of these discussions, that does not mean that there will be major restrictions that are put in place, but if restrictions were put in place for a prolonged period of time, that certainly could put downward pressure on the economic growth prospects for the region," Mr Groff said.
The ADB now expects China's GDP to expand by 6.6% in 2018 and 6.4% in 2019, compared with 6.9% in 2017. The latest projections did not factor in heightened trade tension between China and the US.
"We did some research and analysis about a year ago that suggested that a 1% decline in growth in China would translate into about a 0.3% decline in growth for developing Asia," Mr Groff said. "Now, that has nothing to do with trade issues or trade war or anything like that, but it was just a forecast that if there was an unexpected decline in growth in China, that would translate into less growth for the region."
Chinese President Xi Jinping's top economic adviser, Liu He, is set to visit Washington next week for a second round of discussions with President Donald Trump's economic team. The first round ended with the US giving China a list of demands entitled "Balancing the Trade Relationship", the details of which include cutting US$200 billion from the trade deficit by 2020 compared with 2018 levels.
The US has already slapped duties of 25% for steel and 10% for aluminium on China and threatened to increase duties on $50 billion worth of Chinese goods.
China in turn has threatened tariffs on about $3 billion worth of US imports, including 128 products ranging from pork to steel pipes.
The Chinese have also stopped buying US soybeans, Soren Schroder, chief executive of New York-based Bunge, the world's largest oilseeds processor, told CNBC last week.
Back at the Asean+3 meeting, Mr Veerathai said another concern was that the monetary policy of industrial countries has created an excess of cash flow and raised debt to a "very high" and worrying level in some countries.
"There is a need to think of a mechanism that will safeguard against the debt problems, as going forward there will be a normalisation of interest rates and we have to monitor the debt situation to make sure that this will not affect global economic conditions," Mr Veerathai said.
ADB chief economist Yasuyuki Sawada told international reporters that the "less obvious risk" to Asia's economic prospects is rising private and governmental debt, especially corporate debt in China and household debt in some countries such as South Korea and Malaysia.
China's corporate debt reached 159% of GDP in 2016. South Korea's household debt hit a record-high $1.3 trillion in 2017, and Malaysia's household debt accounted for 84.3% of the country's GDP as of December 2017.
"We are seeing some high level of private debt [in the countries mentioned] if we compare with the economic side," Mr Sawada said. "If interest rate normalisation is faster than expected and the response is tightening monetary policy, then that indebtedness may cause some negative impact on the global economy."
The ADB said that the US Federal Reserve had been clear in its communication with the market and that risk seems to be "well under control" for many Asian economies. The bank credited Asian economies for "moving quite well" in governance and carrying out fiscal and financial reforms.
The bank now expects the Fed to raise its policy interest rate three or four times this year, by 25 basis points in each instance.
Mr Veerathai revealed that there were talks about member countries working together in various fields, including the first periodic review of the Chiang Mai Initiative Multilateralisation or CMIM.
The CMIM, a multilateral currency swap arrangement and repurchase agreement facility for Asean+3 members, was created in the aftermath of the Asian financial crisis in 1997.
The arrangement came into effect in March 2010 and was further reinforced in 2014 when the pool size was doubled to $240 billion, while the International Monetary Fund de-linked portion has been raised to 30% of each member's quota.
"We welcomed the successful completion of the first periodic review of the CMIM, and the revisions will strengthen the CMIM in its role as the regional financial safety net of the Asean+3 countries," Heng Swee Keat, Singapore's finance minister, said during his opening remarks at the joint press conference after the Asean+3 meeting.
Mr Groff spoke of 'newly emerging risks' to Asian growth.
