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SIBOS 2015

We're still at the cusp of the Asian century: DBS chief

Mounting concerns over China should be measured against the pursuit of reform for the long term

Mr Gupta said that "if you ignore the cycles, the reality is that the megatrends on which the Asian story is founded, are pretty inexorable and quite immutable".


DBS chief executive Piyush Gupta on Monday anchored Asia's growth story on megatrends that would propel the region into an economic powerhouse.

He argued that the mounting concerns over China - which have, in some cases, stoked fears of a hard landing - must be measured against the pursuit of reform that would boost the country's position over the long term. In particular, Mr Gupta argued that the woes of bad debt in China can be deftly dealt with.

"We're still at the cusp of what people have often called the Asian century," said Mr Gupta at the conference Sibos 2015. "If you ignore the cycles, the reality is that the megatrends on which the Asian story is founded, are pretty inexorable and quite immutable."

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Mr Gupta noted that Asia's gross domestic product (GDP) has grown from 40 per cent of the US GDP in 2000, to 70-80 per cent of US GDP in 2010. Asia also has an attractive demographic profile, given its average age is 28. By contrast, that stands at 39 in Europe.

"When you have large numbers of young people, that creates a dynamism, and a chemistry of its own."

Meanwhile, there is evidence of rapid integration of the Asian economies, as trade and capital flow with the region. The large multinational corporations today are emerging out of China, and India. Small and medium-sized enterprises are also branching out to building what Mr Gupta called a "spaghetti of relationships" around the region.

The fiscal position of South-east Asian economies today is also drastically different from the days of the Asian Financial Crisis - a comparison that has emerged as the US dollar has gained strength against the Asian currencies - he noted. Given that regional economies have been running a current account surplus for 18 years now, the situation is "chalk and cheese", said Mr Gupta.

"Don't give up on Asia yet. We're alive, we're kicking. We're going to be around for some period of time."

The worries behind China's bad debt should also be measured against its large fiscal capacity, said Mr Gupta. "The state of the problem is no bigger than the US problem when Geithner wrote a cheque for TARP (Troubled Asset Relief Programme) at US$700 billion," he told participants.

Meanwhile, China has been shifting its focus to services - a shift that followed a policy prescription from five years ago.

China, in moving from an administered economy to a market-driven one now, has made some policy missteps, he said. "The big challenge in China is that their process of capital allocation is flawed."

Still, the recent market reform has largely followed a blueprint laid out. "You cannot discount the possibility of accidents. However, once again, I think they are operating to a plan."

Mr Gupta said the most profound innovations in financial technology have emerged from China, with its peer-to-peer lending market bigger than the UK and the US put together on both value and volume terms. The Chinese fintechs have also begun to use voice and facial recognition to fulfil security requirements.

"Last year, Jamie Dimon, in his annual report, said Silicon Valley is coming. I would tell you, the Chinese are here," said Mr Gupta.

Still, traditional banks are well-placed to work better with data. As it is, banks have always been analysing credit card data, which could tell them where the customer is most likely to go for his next vacation, said Mr Gupta.

"The question is, how do we wind up not being dumb pipes, like the telcos, and use that network advantage - the clearing, settlement, market infrastructure - that we have, meaningfully."

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