NZ Businesses Need To Take Heed Of Davos, Highlights HSBC

27 January 2012

With attention at the World Economic Forum in Davos overnight turning to China and how and whether it could help developed economies such as the USA and Europe avoid further recessions, there are some strong messages coming out of the forum that New Zealand businesses need to take heed of, highlights HSBC.

China is increasingly seeking to secure additional interests on foreign assets and continues to require access to raw materials, which is changing the shape of financial flows within the global economy, much as the emergence of other countries, such as the UK and US, has done so in the past. And with the Western world facing significant financial challenges caused by high debt levels, the reality is that the West increasingly needs access to China’s deep pockets. Without this investment, many assets would not be developed at all. To facilitate these developments China is rapidly moving to develop and deepen its financial markets and to internationalise the Renminbi.

Paul Bloxham, Chief Economist, at HSBC New Zealand, says: “China’s focus on developing its financial markets and internationalising its currency is no doubt one of the biggest financial revolutions that we will see this century. If the 20th Century was about the rise of the Greenbacks, the 21st Century will surely be about the rise of the Redbacks.”

“Meanwhile, politicians in Europe are trying to hash out a resolution to the Eurozone crisis and across the Atlantic the US also faces the enormous challenges of reducing high US government debt and lowering unemployment. The rise of the Redback is just another result of the shifting centre of gravity of the world economy back towards the East which will continue this century,” he continues.

While history may show that the West has dominated for the majority of the 19th and 20th Century, growth in the future will come from emerging markets – particularly the likes of China. As it does so, the rest of the world, including New Zealand will become ever more dependent on policies made in Beijing, goods made in Guangdong and financial services made in Shanghai and Hong Kong.

Cath Henry, Head of Global Payments and Cash Management, at HSBC New Zealand says: “This is where it gets serious for New Zealand. Kiwi importers and exporters need to ensure they stay close to China and other emerging markets as they grow and prosper. They need to seek opportunities for trade with emerging markets and think about making payments in currencies outside the NZD, USD and Euro.”

“In fact, the future of New Zealand's economy is now more dependent on developments in Asia than at any time in the past. As emerging Asia continues to grow, income levels are also rising and so too does the demand for protein. This is supporting milk and meat prices, and will boost incomes and investment in New Zealand – all of which only paints a positive story for New Zealand’s outlook.”

"2012, the year of the dragon, is a year that will be defined by China's leadership transition and the efforts it makes to ensure economic stability and steer the economy towards balanced and sustainable development. A beacon of hope for the global recovery, China's economic strength will continue to shine in 2012, just when the world needs it most," concludes Henry.

Notes:

1. HSBC in New Zealand
HSBC in New Zealand operates through a network of branches and offices, providing personal and commercial financial services, payment and cash management, trade finance, treasury and financial markets, corporate banking, investment advisory and securities custody services. The principal HSBC Group member in New Zealand is The Hongkong and Shanghai Banking Corporation Limited, incorporated in Hong Kong SAR, acting through its New Zealand branch.

2. The Hongkong and Shanghai Banking Corporation Limited
The Hongkong and Shanghai Banking Corporation Limited is the founding and a principal member of the HSBC Group which serves customers worldwide from around 7,500 offices in over 80 countries and territories in Europe, the Asia-Pacific region, North and Latin America, the Middle East and Africa. With assets of US$2,691 billion at 30 June 2011, HSBC is one of the world’s largest banking and financial services organisations.

ENDS

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