To facilitate and stimulate discussion at the inaugural Asia-Global Dialogue, the Fung Global Institute is pleased to present an overview of our related research initiatives. The document introduces the Institute’s four key research themes (Global Supply Chains; Asia Finance 2020: Designing a New Asian Financial Architecture; Evolving Growth Models in China and India: Opportunities and Risks, and Asia’s Sustainable Development); it explains our methodology for mapping and tackling these complex inter-locking subjects, and outlines our initial plans for research output, partner engagement, timelines and dissemination.
Research Project Overview - Asia in a Changing Global Landscape for Trade, Finance, Governance and Sustainability
For several decades, Asia’s economies have been industrialising, urbanising, and expanding their role and importance in the global economy. Inevitably, a development of such magnitude alters the global economic balance, as evidenced by surpluses in the East and deficits in the West. There are other asymmetries, in particular, between the haves and have-nots, and between those who advocate continued growth with higher levels of material consumption in the developing world and those who favour less growth or a different kind of growth because of anxieties about the onset of global climate change and increasing competition for scarce resources.
Many of the economic theories, systems and institutions of governance that have supported us up to now are ill-equipped to handle the unprecedented speed and depth of change in the global economy. Experts are re-thinking long-held assumptions and putting traditional theory to the test. For example, regulators responsible for the efficient functioning of markets -- and considered relatively impartial -- now see that they are integral parts of the systems that need reforming.
Ongoing uncertainties in the global operating environment are undermining business confidence, both in the real sector, where goods are made and traded and where jobs and value are created, and in the financial sector, which channels savings to investment. The apparent inability of governments, central banks and international agencies to address high unemployment and financial crises only exacerbates these concerns.
In this new phase of the global economy’s evolution, there are also new questions about the role of the state versus the market in national development, especially for the re-emerging economic giants, China and India, and about how rising material living standards for billions more people will affect the planet’s carrying capacity. The UN has estimated, for example, that if current consumption trends continue, by the 2030s we will need two Earths to support us, not one.
Asia’s role in the success of this global re-balancing is increasing. Asia’s share of global GDP is forecast to grow from 27 per cent at present to almost 35 per cent by 2020 and over half by 2050. By that time, the region will also house about half of the world’s savings and financial assets.
This is why the Fung Global Institute, with its mission to bring Asian perspectives to bear on global issues, has embarked on a multifaceted programme of practical research into the challenges and realities of re-balancing. As an independent global think-tank based in Hong Kong, we are looking from the Asian end of the telescope at how re-balancing can be achieved in an equitable way that improves global conditions and governance and that enables business to create jobs, income, and value for the long term. This is the age of constrained optimisation and of imperatives to find harmony between people, profit and planet. Looking three-to-five years into the future, we will provide Asian perspectives on the four dimensions of the global economy sketched above, namely: the real sector, finance, the role of the state versus the market in economic governance, and sustainability. Hong Kong, with its geographical position at Asia’s crossroads and its scaffolding of global networks and free information flows, affords an ideal viewing platform.
Our entry point into the real sector is the phenomenon of global supply chains. These are significant in that they create and allocate jobs across regions and countries. In the past 30 years, strong growth and impressive results in poverty reduction in the developing world coincided with the emergence of global supply chains. As trade flows and cross-border investments undergo a massive transformation against the backdrop of global re-balancing, global supply chains are once again on the cusp of major change. The question we seek to answer is how the next generation of the global supply chains will shift trade, jobs, incomes, profits and wealth in the context of the rapidly changing global landscape. This project will be led by the Institute’s founding Chairman, Victor Fung, who has been deeply involved in the development of global supply chains as Chairman of the Li & Fung Group of companies.
Our springboard into the second research theme, finance, is Asia’s expanding role in re-shaping the global financial system. The crisis that began in mid-2007 has triggered a fundamental review of the international financial order and architecture. Clear trends are emerging: tighter regulation driven by stronger attention to public risk; increased need for policy coordination; and attempts to reflect the expanding geopolitical, economic and financial importance of emerging economies. This project will analyse how developments in Asia – such as the internationalisation of the Chinese and Indian currencies, the design of Asian capital markets, the evolution of Asian pension schemes as populations in the region age, and the future of banking in Asian markets — might affect the new international financial order. A key intended outcome of the project is an understanding of what type of financial system Asia should have to foster sustainable and equitable growth, avoid systemic risk and serve the real economy better. We also want to understand how these Asian elements fit into – and require changes to – the global architecture. The Institute’s President, Andrew Sheng, a former central banker and regulator, and currently Chief Advisor to the China Banking Regulatory Commission, will lead this project.
In analysing the role of the state versus the market in economic governance, the third research project turns to India and China. These two countries, with their different histories, political systems and cultures, have pursued very different development strategies, with differing outcomes in terms of economic growth, social equity, global integration and environmental impact. Now, as reflected by their respective growth plans, they are at inflection points from which they seek to transform their economies to meet new sets of challenges. By reviewing the respective strategies and outcomes of India’s and China’s growth thus far, the project seeks to understand the dynamic interaction between governance systems, business activity, global integration and environmental and social policies. The project will thus enhance global understanding of the institutions, strategies, and systems that will enable economies to pursue “smart, sustainable growth” even during times of great change and disruption. This project will be led by the Institute’s Research Director, Xiao Geng, formerly a director of the Columbia Global Centers | East Asia; Founding Director of the Brookings-Tsinghua Center for Public Policy, and a professor of economics at the University of Hong Kong.
In our fourth global theme – sustainability – we start from a realisation that the economic models and material consumption patterns that have underpinned global growth for the past 100 years are unsustainable in the face of planetary limits and social inequities. A global transformation is needed – one that goes far beyond whether we consume marginally more efficiently, or less. As the new driver of global growth, Asia has the opportunity to experiment with new forms of development, including re-thinking how we create economic value, and how that value is distributed amongst societies and communities. This project will inform our understanding of Asia’s options in terms of economic structure, business innovation, and social wealth, in the pursuit of sustainable development. This research stream will be led by the Institute’s Academic Board Chairman Michael Spence, in conjunction with Nicholas Stern. Michael Spence is Nobel Laureate in Economics, a world authority on growth in developing countries and a former Dean of the Faculty of Arts and Sciences at Harvard, and of the Stanford Business School. Lord Stern is currently the IG Patel Professor of Economics and Government at the London School of Economics and Political Science, Chairman of LSE’s Asia Research Centre, Director of the India Observatory, and Chairman of LSE’s Grantham Research Institute on Climate Change and Environment.
In tackling these issues, the first priority of the Fung Global Institute has been to design a research process that goes beyond the conventional to enable us to access and generate new thinking. As Einstein said, we cannot solve problems with the same thinking that created them.
Our research process is, in fact, a cycle of processes that, from beginning to end, draws together thought leaders in industry, academia, government and civil society, in addition to corporate partners hand-picked to collaborate on individual research themes. For each project, our focus is on integrating the available knowledge about the current state of each sub-system, the key issues that are or will become apparent, best options for addressing them and on finding the right process for policy implementation and collective action. The experts, executives, and policymakers participating in our research bring invaluable field knowledge and experience to the table to identify our leverage points that can effect systemic change without disrupting system stability. Equally, executive learning is an integral part of our intended research outcomes and follow-up action.
As our findings emerge, they will be tested and adjusted via a continuous loop of real-world feedback and review of components within a systemic whole. We are committed to “learning by doing”. The beauty of this approach is that the research process, itself, becomes an engine of new thinking. Fresh insights can be fed continuously into the changing equations of the evolving sectors and situations under examination. We will concentrate on the “last mile” problem of how to act within the hard trade-offs and options that have to be made. In other words, there will be no waiting years for published results that are fixed in time and therefore soon overtaken by fast-moving developments. Communication on what is being learned shall be prompt, frequent and interactive, both on this web platform and through face-to-face dialogue.
