Asia's contribution to global rebalancing

Developing Asia remains at the core of global payment imbalances. While the geographical concentration of current account imbalances is significant-with the People's Republic of China accounting for the lion's share of the region's current account surplus-how Asia contributes to global rebalancing also depends critically on the newly industrialising economies and larger Association of Southeast Asian Nations economies. Given the region's huge diversity, the necessary national macroeconomic and structural policies will vary significantly across Asia's emerging economies. Whereas near-term rebalancing efforts will be driven primarily by macroeconomic and exchange rate policies, structural reforms are essential for boosting domestic and regional demand as sources of economic growth over medium to long-term. We argue that regional rebalancing will depend critically on the adoption of deeper and more comprehensive structural reforms and further trade liberalisation to unlock the potential of strong domestic and regional spending-thus reducing Asia's high dependence on extra-regional demand. Priority policies should include infrastructure spending, competition, trade, financial development, investment, immigration, and other social policies to reduce national savings.