China likely to transit to consumption-led economy: Experts

Photograph taken by a drone at the GIC Insights’ welcome dinner held at Candlenut @ Dempsey. PHOTO: GIC

Long-term drivers of growth in Asia remain favourable while China will likely transit from an investment-led to a consumption-led economy, a change necessary for sustainable growth.

These are some experts' views that emerged from GIC Insights, an annual conference attended by more than 110 prominent global business leaders to deliberate long-term issues relevant to the international business and investment community.

Participants included Mr Bob Prince, the co-chief investment officer of Bridgewater Associates, one of the world's largest hedge funds; Mr Vikram Pandit, the chairman and chief executive of the Orogen Group, an investor in financial services companies and related businesses; and Mr Matt Ocko, the managing partner of Data Collective, a venture capital fund that backs entrepreneurs applying deep tech to transform giant industries.

Among the topics discussed were Asia's prospects and challenges as well as how artificial intelligence is being deployed to improve and disrupt traditional technologies.

Speakers at the forum noted that China is undertaking reform of its state-owned enterprises, but this needs to accelerate, having slowed in the last five years.

The country should also shift to market-oriented governance while unemployment remains low, they noted.

In addition, China is experiencing a shift in attitudes towards entrepreneurship, driven by people returning to the country and state support via subsidies.

Urbanisation and growth of the middle class in the region will be driven by China, India, Indonesia, Vietnam, Cambodia and Myanmar.

But developed economies (Singapore, Taiwan and South Korea) will remain important, as cities will continue to drive innovation.

The region will also be integrating more rapidly in the coming years - as evidenced by increasing financial integration and intra-regional tourism.

Dr Jeffrey Jaensubhakij, GIC's group chief investment officer, said: "Investment is often characterised as a zero-sum game as we compete every day. However, investment and allocation of capital is an activity that also creates.

"By competing more rationally for assets, we set the right price, signal the expected returns available and direct capital to its best use. When done right, this concerted effort by all in the ecosystem will drive better economic outcomes and returns."

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A version of this article appeared in the print edition of The Straits Times on October 03, 2017, with the headline China likely to transit to consumption-led economy: Experts. Subscribe