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Structural reforms hold key to Asia’s progress

For Asia to continue leading the global economic growth, it has to introduce a series of structural reforms in different sectors. This theme of structural reform has been echoed repeatedly by International Monetary Fund chief Christine Lagarde in many of her visits worldwide, of which the last was New Delhi.
Asia already accounts for 40 percent of the world economy and stands to deliver nearly two-thirds of global growth over the next four years, Lagarde, told the Advancing Asia conference in the Indian capital.
No doubt, the global economy is intertwined. Both Asian and global economies get affected by economic growth or slowdown in each.
So to reverse signs of the global economy, Asian countries, which account for 40 percent of the global economy, should carry out structural reforms to boost competitiveness, jobs and ensure growth in future. Lagarde didn’t miss an opportunity to cite examples, including the need for China to rebalance its economy away from debt-led investment, the need for corporate governance reforms in Japan and for improvements in Indian infrastructure.
Yet, despite looming economic slowdown, India’s government has projected economic growth of 7.6 percent for the financial year 2015-16, making it the world’s fastest-growing major economy, but below the previous forecast.
Meanwhile, the UAE has been consolidating its economic ties with the two Asian economic giants: China and India, with bilateral trade between both India and China growing to nearly$60 billion each. By strengthening the trade with both countries, the UAE will become a pivotal country at the heart of global trade.
Slower Chinese growth, a stronger US dollar, collapsed oil prices and political turmoil could wreak further havoc in struggling economies like Russia and Brazil, putting the brakes on the global recovery, IMF report said in January.
Despite concerns about China’s economic outlook, People’s Bank of China governor Zhou Xiaochuan said on Saturday that there was no need for ‘excessive’ monetary stimulus to hit the government’s target of at least 6.5 percent growth over the next five years.
Chinese officials blamed the disappointing industrial output data on sluggish foreign demand, the government’s efforts to cut pollution-heavy production of steel, cement and coal and slumping output of tobacco products.
Even as China tries to assure investors about ability of China to reverse the current economic slowdown, the global market remains concerned over the outlook of China’s economy and analysts have questioned Beijing’s ability to maintain growth while implementing reforms to transform the economic model to one that relies on consumption rather than government-driven investment and exports.
The central bank has cut interest rate six times since late 2014 and also reduced the amount of funds banks must set aside as reserves to boost lending.
Worried economists cite the country has seen a flood of cash leaving in the past few months and its foreign exchange reserves, the world’s largest, continue to decline. Yet Chinese officials see this as normal, noting that such outflows were “not strange at all” given that China enjoyed massive inflows for many years.
Statistics show China’s foreign exchange reserves dropped $28.6 billion to $3.20 trillion at the end of February from the previous month, after falling $99.5 billion in January and a record $108 billion in December.
History has it that Asia has been the global economic driver in recent decades. For the past 50 years, most countries in Asia have grown faster than their North American and Western European counterparts. China is only the most noteworthy, growing more than 7 percent a year, but it’s by no means alone. South Korea, Indonesia, and India are all growing more than 5 percent per year. Even Japan, at 3.3 percent over the past 50 years, has been growing faster than the US and Western Europe.
In terms of figures, Asia could still play stronger role in the global economy. With the introduction of pledged structural reforms, it will harness expertise and huge human resources to achieve this purpose.

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