Asian economic power to rival US in global markets soon, says RBA governor Glenn Stevens By James Glynn

 Asia's economic power is increasing at a rapid rate, and the region will take on heightened prominence such that it will soon rival the US as the main source of direction for global markets, Reserve Bank of Australia governor Glenn Stevens said today.

Reserve Bank governor Glenn Stevens.

 

 "It is not just the center of gravity of economic activity that is shifting to Asia, the weight of financial assets is also shifting too," Mr Stevens said in a speech in New York to the American Australian Association.

 Asia's increased weight in global affairs will mean it will increasingly be the source of shocks to the world economy, he added.

 In the future, "there will be several potential sources of music emanating from various centres around the world, to which markets everywhere will respond to some extent," he said.

 "The United States will certainly be one, and so will Europe. We will all need to attune our ear to Asia's rhythms as well," he added.

 With the Chinese government seeking annual economic growth of 7 per cent, China's weight in the global economy will exceed that of the euro area in five years and approach that of the US within a decade, he said.

 With India's rapid emergence also in play, Asia's prominence in the global market will be further enhanced, he said.

 As an example Asia's rise, Mr Stevens noted the Shanghai Stock Exchange is already two-thirds the size of the London and Tokyo Exchanges in terms of capitalisation.

 China's expansion won't be uninterrupted as its economy will experience cycles just like any other economy, but "things are happening quickly," he said.

 China is Australia's largest trading partner, with 70 per cent of its merchandise exports now going to the country.

 Mr Stevens said the US economic recovery is gaining traction while Europe is facing the most extreme intraregional differences since the introduction of the single currency.
 US banks are well ahead of their European counterparts in cleaning up their problems, he added.

 He said a lot of work needs to be done to resolve problems in the global economy, and called for the focus to be taken off bilateralism.

 "It does not help...that so much of the discussion takes place through a bilateral prism," he said. "The issues are multi-lateral, not bilateral."

 The Group of 20 advanced and emerging economies is a powerful forum for such discussions, he added.

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