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Just thought i’d let you know, it’s on now! If you want to get the best airfares around Asia, and even long haul flights to destinations in Europe or Australia, AirAsia are now having their ‘Awesome 20% Sale’ on all flights operating on over 165 routes. AirAsia have begun their 20% off sale – Applicable on all flights on all routes! The sale begins today (January 11, 2012) and ends on January 13.

The three day sale is available on travel on any immediate flight departing between the 30 th  of January and the 26 th  of April 2012. For those planning a long haul vacation, the 20% offer includes thecomfy premium fly flat beds on flights to New Zealand, Japan, Australia, China, India, Taiwan, Europe and Korea. Long haul AirAsiaX flights, which feature the cheapest bed in the sky, are also included in the Awesome 20% Sale.

Thai AirAsia chief Tassapon Bijleveld said that it highlighted the budget carrier’s commitment to giving more passengers the chance to take off by providing low fares. “AirAsia is showing our commitment to providing low fares by offering this ‘Awesome 20% Sale’ throughout both AirAsia and AirAsia X’s route network. Now guests will be able to connect to more than 80 destinations in 23 countries. Apart from affordable air travel, this promotion will also allow people to travel immediately while enjoying even lower fares to any of the over 165 destinations that AirAsia and AirAsiaX fly to. ” But it’s not just in the sky where savings are to be made, but also on the ground.  The low-cost group’s holiday division, AirAsiaGo, is also offering a 10% discount on selected destinations for bookings made between 11 and 13 January.

The travel period for this promotion is also from 30 January – 26 April 2012.

To make holidays more interesting and memorable, guests may log on to airasiago.com to be able to mix and match their preferred tour and activities, apart from affordable holiday packages and lodging.

Together with the partnership with Expedia, the travel portal has 130,000 hotel partners around the world. Guests are also able to enjoy the ‘Awesome 20% Sale’ via AirAsia’s mobile apps on Blackberry, iPhone and Android devices, or via mobile.airasia.com on WAP enabled phones.

The discounted fares can also be purchased through our flight search engine – visit http://flights.thaitravelnews.net  Related Video

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Sale Time at AirAsia! Save 20% on bookings before 26 April 2012!

Burma’s pro-democracy leader Aung San Suu Kyi met late Monday at her lakeside home with billionaire American philanthropist George Soros, the latest public figure to pay the Nobel Prize laureate a visit since her release a year ago from 15 years of on-and-off house arrest.

Soros, whose foundation supports grantees that provide uncensored news on Burma and activists who call public attention to abuse of power, arrives in the wake of a stream of visits, predominantly by senior foreign dignitaries.

Political Science Professor Carl Thayer of the Australian Defense Force Academy says influential business and political leaders are lining up to ride the crest of change in Burma and to reinforce reform efforts.

“As intelligent as she is, she has been relatively isolated,” he says. “And she needs, I think, the advice of people like Soros and others, the financing and foundations, and people on the ground to provide and reinforce her efforts.”

In the past month, Aung San Suu Kyi met with the U.S. Secretary of State Hillary Clinton, Thailand’s Prime Minister Yingluck Shinawatra, and foreign ministers from Indonesia and Japan. Later this week, British Foreign Secretary William Hague is expected to visit.

Hague’s visit will coincide with a general amnesty for prisoners announced Monday by Burma’s state media.

In what is typically a regular gesture to mark Burma’s Independence Day, selected prisoners will have their sentences reduced beginning Tuesday. It is not clear how many in jail will be affected by the amnesty or how many political prisoners will be included.

Burma is holding hundreds of people for their political beliefs. Clinton and other officials visiting Burma have joined Aung San Suu Kyi in calling for their immediate release.

Thitinan Pongsudhirak, Director of the Institute of Security and International Studies at Bangkok’s Chulalongkorn University, says Clinton’s visit opened the way for diplomatic engagement with Burma, also known as Myanmar.

“It is a green light for other countries to begin to lift sanctions [and] provide development assistance,” he says. “They have to be careful by not promoting the commercial interests too much too soon. There are some dissident groups that see all of this as a big kind of commercial deal.”

Burma is a major source of natural gas, gems, and timber, but trade is limited by Western countries because of economic sanctions over the military’s suppression of democracy and human rights.

Since the government of President Thein Sein took office in March, replacing overt military rule, it won praise for a series of liberal political and economic moves. President Thein Sein held direct talks with Aung San Suu Kyi after assuming office.

Thitinan says cooperation between the two is vital for the momentum of reform to be sustained. He says there are still hardliners in the government who would derail the process if it goes too fast.

“The momentum that we are seeing is just unprecedented and breathtaking,” he says. “It is going to be difficult to reverse some of it without incurring a great cost to the Myanmar rulers. Even if they want to slow it down, to reverse it, now they are in too deep. Now I think leading up to the Myanmar chairmanship of ASEAN 2014. I expect the reforms to be sustained.”

On Sunday, Burmese authorities hiked gas prices by 30 percent. A similar unannounced price jump in 2007 sparked protests that were later crushed by the military.

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In Burma, Visiting Dignitaries Line Up to Ride Crest of Change

By Shibani Mahtani and James Hookway Reuters Billionaire hedge fund manager George Soros speaks at the Central European University in Budapest in November. Billionaire hedge fund manager and philanthropist George Soros is scheduled to become the next big international name to meet with Myanmar’s pro-democracy leader Aung San Suu Kyi on Monday in a fresh sign that the country is continuing to open up to the outside world. Nyan Win, spokesman for Ms.

Suu Kyi’s National League for Democracy said Friday that the two are scheduled to meet in Yangon on Jan. 2 and that they will likely discuss the ongoing work of Mr.

Soros’s charitable foundation in the country.

The U.S.-based financier’s Open Society Foundation donates around $2 million a year to projects in the country, often supporting educational programs and scholarships, and he is believed to be touring some of those projects this week with members of his family. Mr.

Soros, 81 years old, couldn’t immediately be reached for comment. His visit follows the early December visit of Hillary of Clinton, who became the first U.S.

Secretary of State to visit the country in over 50 years.

That trip helped further warm the blossoming relations between the two countries since Myanmar’s military rulers handed power to a new, nominally civilian government in March.

Since then, the country has made tentative steps towards implementing a broader democracy, including freeing hundreds of political prisoners, engaging with long-persecuted ethnic minorities and allowing Ms.

Suu Kyi’s political group to contest elections after she was detained for years under house arrest. Government advisers have described the reforms “irreversible” and the U.S. has responded by lifting a block on development assistance to the country , effectively freeing up specialists from the International Monetary Fund and World Bank to help Myanmar officials liberalize their ossified economy.

The Indonesian and Japanese foreign ministers also have visited Myanmar in the past week. William Hague, Britain’s foreign secretary, is scheduled to visit the country next week. U.S. and European Union, though, continue to impose strict sanctions on the country and are pressing Myanmar’s government to release all of the some 2,000 political prisoners still believed to be held in detention.

That prevents Mr.

Soros from investing in the country, if he wanted to do so. Local media reports , meanwhile, say that Mr.

Soros will also take in sights at popular tourist destinations such as Inle Lake and Bagan.

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George Soros Heads to Myanmar

Japanese Foreign Minister Koichiro Gemba has met with Burmese democracy leader Aung San Suu Kyi, seeking to assure her of Tokyo’s full support for expanded democratic governance in the Southeast Asian nation.

Gemba held talks Monday with the Nobel laureate at her residence in Rangoon, and later told reporters he wants her and leaders of the country’s new civilian government to attend a summit in Japan next year.

“I invited President U Thein Sein to attend the Japan-Mekong sub-region summit due to be held in Tokyo sometime next year. I also invited Daw Aung San Suu Kyi to visit Japan,” said Gemba.

For her part, Suu Kyi, who has spent much of the past two decades under house arrest, thanked Japan for its support.

“Our country is bound and determined to march towards the democratic goal. In doing so, I expect Japan to be at the forefront of friendly nations who will help us,” she said.

Earlier Monday, the Japanese minister agreed with Burmese leaders to open negotiations on a bilateral investment pact. He also urged his counterpart, Wunna Maung Lwin, to free more political prisoners and ease restrictions on media and businesses.

Suu Kyi formally registered her National League for Democracy party last week, clearing the way for her to run for a seat in parliament.

Party officials say they will contest a series of upcoming by-elections once the registration is formally approved. Suu Kyi has not yet announced the constituency in which she expects to run.

She also visited the parliament last week for the first time since her release from house arrest late last year. She met with Shwe Mann, a senior figure in the nominally-civilian government and the long-ruling junta that preceded it.

The NLD was stripped of its status as a party last year because it refused to participate in controversial national elections, in which the popular democracy advocate was not permitted to run.

The election produced a new government which, while still dominated by past and present military officers, has implemented a series of reforms, relaxing media restrictions and opening dialogue with critics of the former junta.

Some information for this report was provided by AFP and Reuters.

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Japanese FM Assures Burmese Icon of Full Support

Author: Shiro Armstrong, ANU

In President Obama’s landmark speech in Canberra last month, an over-riding theme was that the United States welcomes China’s rise so long as it plays by the global rules.

Yet those rules are dynamic, and there is a need to have China involved in setting them given the scale of China and its importance to the regional and global economy, as well as to global security.

China needs to help set the rules and agree to them so that it has buy-in — not have those rules created around it. The latter scenario may have been possible a decade ago, but not now. It is crucial, then, that a major trade policy initiative in the Asia Pacific, such as the Trans-Pacific Partnership (TPP), include China, else it will become one of the set of rules created around China, constraining not promoting one of the main trans-Pacific economic relationships.

As the major growth engine of the global economy, China’s exclusion from the TPP raises questions about the TPP’s likely success. The TPP’s purpose is to weld the region together and lock in growth of trans-Pacific economic relationships. The central strategic challenge for the TPP, therefore, relates to China’s membership.

But can China join? And should it join? The biggest risk of the TPP is political: that it might divide the region strategically between its members and the rest, with China being on the outside. The TPP has been supported by two prominent US trade policy figures, Fred Bergsten and Jeffrey Schott of the Petersen Institute of International Economics, as a way, they say, for the US to engage in East Asia as ‘China propelled the advance of Asian regionalism’. ‘These countries are well on the way toward creating an Asian bloc, a development that could “draw a line down the Pacific” by discriminating against [the US]’, they add.

Yet if the TPP proceeds on terms set by the US, it would be very difficult for China to join, and the TPP itself, according to Christopher Findlay, may ‘drive the region apart with systematic exclusion of non-members, including China’. This wedge through the middle of the Pacific will be political as well as economic. China would have to join the TPP on US terms as the TPP has now become a creature fashioned largely by Washington. Bergsten and Schott give priority to Japanese and Korean membership, envisioning the use of those strengthened alliance relationships to balance the influence of China.

The difficulty for China in joining the TPP stems from aiming for an agreement designed by, and for, countries able to digest US-moulded intellectual property rights (IPR), labour and environment standards, and other commercial settings. Many will be watching the conditions which are defined for Vietnam’s entry, the least developed country in the current TPP line-up. If the standards of entry for Vietnam are appropriate, there will need to be long phase-in periods to meet them. The benefits of US market access may dominate potential costs for Vietnam; this is not necessarily the case with China.

The US has been pushing for more regulatory discipline for state-owned enterprises (SOEs) in the negotiations around the TPP and, in particular, competitive neutrality between SOEs and private enterprises in member economies. Vietnam and Malaysia are the two economies currently involved in the TPP negotiations in which SOEs are prominent or dominant. Reform of SOEs and the privatisation process is a deeply domestic issue that will not be resolved quickly in China.

The WTO accession experience shows that locking China into reforms can only occur, especially now given its size, when it is committed to using external institutions as tools in its own interest to open up and reform its domestic economy. A TPP agenda and negotiations in which the US effectively declares itself the gatekeeper is likely to make it extremely difficult for China to commit to the TPP and join.

If China is ever to accede to the TPP, the agreement would need to be designed with open accession terms that allow China to meet its own interests. It is not that China should not be bound by TPP rules: it is that China would need to be persuaded to bind itself, consistently with its own reform agenda, in the areas covered by the TPP and on its own terms. If the TPP ends up being a set of related bilateral agreements (a bowl of noodles within a bowl of noodles), for which the US has thus far revealed a preference (see Claude Barfield), China will have to negotiate bilaterally with the US in order to join a broader TPP — no matter what the wishes of other members; and any agreement would require separate approval by the United States Congress. That is rightly viewed as a set-up.

Expansion of membership and creation of an inclusive agreement was the original aim of the TPP, and that is where its potential economic benefits lie. But easy expansion of membership is perhaps the biggest challenge. The risk is that, once an agreement is negotiated in whatever shape or form, sign-on by non-members in the region (an explicit goal) will be difficult with extra requirements for new members and individual-member veto over new membership, notably, by the US. If the agreement requires consensus from members (or incumbents) on new entrants rather than the meeting of carefully-constructed and transparent rules of entry, effective veto-power on new membership will be built into the arrangement.

A transparent and established process with clear criteria in application for membership is needed for two reasons. First, it will give members less discretion over the conditionality they can add to individual members for accession. Second, a membership bid would not have to be triggered by an invitation from members — membership that is contingent on invitation would create maximum discretion for incumbents and is not congenial to expanding membership. Automatic sign-on is not constitutionally easy for the US given that Congress will have to approve each new member separately. But that was exactly the original idea of the TPP’s predecessor, the P3 and P4 agreements with Chile, Brunei, New Zealand and Singapore.

Perhaps China should announce it wants to join negotiations right away, not to play spoiler, but so that it can engage directly in defining what the rules for much of Asia Pacific trade should be. That would be the surest strategy in ensuring that the TPP was open and dynamic, not static and exclusive. Otherwise there are likely to be one of two broad outcomes from the TPP initiative. The first is that the US succeeds quickly, as it has signalled it wants to, in locking the other 8 pliant negotiators into an early deal that is full of exceptions and has limited or negative liberalising effect but the exclusionary features of which maintain symbolic pressure on non-members like China. This might be called the just-another-trivial-FTA-outcome. The second is that the negotiators hold to more rigorous liberalising targets that will take much longer to negotiate. That is likely to entrench Chinese exclusion more deeply. Either way there is no indication that the intention is to draw China into the process. And that will not only be to China’s cost, but also to cost of China’s partners in the region and global welfare.

Shiro Armstrong is a research fellow at the Crawford School of Economics and Government at the Australian National University and is co-editor of the East Asia Forum. He is also editor of the new book The Politics and the Economics of Integration in Asia and the Pacific (Routledge, 2011). A longer version of this essay can be found here as EABER Working Paper No. 71, 9 December 2011.

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China’s participation in the Trans-Pacific Partnership

Agence France-Presse A computer user in Singapore looks at a website of now Member of Parliament Tin Pei Ling in April 2011, before the May 7 parliamentary elections in Singapore. In a year that saw a surprising flurry of political activity in the often-quiet city-state, Singapore’s youngest Member of Parliament Tin Pei Ling was the most-searched personality in 2011, trumping now-deceased Amy Winehouse and Steve Jobs, according to Google’s annual Zeitgeist list.

The Zeitgeist list, which takes its name from the German word meaning “spirit of the times,” aims to offer a unique perspective on the year’s major events and trends based on searches conducted on google.com.sg.

The Google Zeitgeist list — which the tech giant compiles for many countries with their own Google search domains — provides an insight into the personalities and issues that have captured Singaporeans over the past year, which analysts say saw a small but significant political shift in the city-state. Ms.

Tin, now a Member of Parliament, was put forth by the ruling People’s Action Party in this year’s general election, running alongside former Prime Minister Goh Chok Tong.

The decision was questioned by many Singaporeans, who pointed to her husband’s position as Prime Minister Lee Hsien Loong’s personal private secretary, and considered her inexperienced and ignorant. A widely circulated picture of her posing with a Kate Spade bag quickly went viral, and invited comments accusing the 28-year-old of materialism and privilege. Also topping the search list were ex-Foreign Minister George Yeo and 25-year-old Nicole Seah, a young member of the opposition National Solidarity Party who ran against Ms.

Tin.

Though some experts argue that Ms.

Tin was fronted by the PAP to appeal to a younger audience, they did not expect the negative and almost viral effect that her candidacy had on this year’s general election. “(Ms.

Tin) was supposed to be more savvy with new media than the older ones in the PAP,” said Andrew Loh, a social activist and blogger. “What transpired…put her under the spotlight in a way which the PAP had not intended.” He added that conversely, Ms.

Seah’s popularity “went through the roof” once the public became enamored with her as a counter to the PAP’s Ms.

Tin. In 2010, the only Singaporean politician to make the list of Google’s top searches was former Prime Minister and political giant Lee Kuan Yew, who was nowhere to be found the 2011 list. Despite many heralding social media as the force for political change in the past year’s general election, which saw a historically-narrow win for the PAP, influential political blogs like TheOnlineCitizen did not feature on Google’s list of top local blogs. “I am a little surprised,” said Mr. Loh, adding a caveat that “overtly political blogs” started from a much lower base of readers, so even with new readers picked up during the general election, they would still lag behind popular personality-driven blogs like Mr. Brown and Xiaxue . Mr. Brown was listed as the top local blog on Google. In tech-obsessed Singapore, the iPad 2, the rumored iPhone 5 and Samsung also grabbed top news searches over the year, along with news on the general elections, the earthquake and tsunami in Japan, and political uprisings in Egypt, Tunisia and Libya.

Teen pop sensation Justin Bieber topped the image search list in Singapore. Perhaps odd in a city-state that prides itself on diverse hawker fare – often featured by celebrity chef Anthony Bourdain and more recently, on “The Simpsons” – very American fare of pizza, pancakes and red-velvet cake were among the top food searches in Singapore. Hong Kong emerged as the top travel destination for Singaporeans, though beach getaway spots like the Maldives and Hawaii were also among those ranked highly.

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Young, Female Politicians Top Singapore Search List

It’s too soon to know what caused July’s deadly high-speed rail accident in Wenzhou, but not too late to try making money from the conclusions. The government says its investigation of the collision of two bullet trains that killed 40 and injured 191 has concluded—though details about what happened aren’t yet ready for public consumption. Even so, train ridership is up, bullet trains are back on track after inspections and funding for the sector is flowing anew.

Now, two Citigroup Inc. analysts say it is time for investors to have a fresh look at one of the companies that equipped the trains – but wasn’t implicated – that collided in July. Shares of Hollysys Automation Technologies Ltd. are a “buy,” with more than 50% upside potential, says the new 52-page report focused on the company.

Analysts Paul Gong and Jenny N. Zhen said positives for Beijing-based Hollysys include its “secular growth potential in industrial automation amid rising labor costs,” “market-share gain opportunities from foreign players” and “a relatively good position in the railway market.”

Hollysys published its own conclusion two days after the accident, saying its signaling equipment on board both trains functioned well.

Its Nasdaq-listed stock nevertheless suffered, along with others in the rail sector that have been hit hard since the railway minister was fired in February.

Now, the Citigroup analysts say Hollysys shares could rise as far as $13.60 each, a 50%-plus gain from the $8.98 level the stock stood before the report’s publication early this week.

The Citigroup report may help explain a roller coaster for the stock in recent days. The investor advisory follows stock upgrades by Piper Jaffray and J.P. Morgan & Co. analysts, purchases of Hollysys shares by company executives and waning enthusiasm of investors who try to profit from a share-price fall.

After the train crash, Hollysys was subject of a Wall Street Journal investigation that explained how China’s use of foreign technology in its bullet-train signal systems highlighted deep international distrust over the country’s industrial model, including weak intellectual-property protections, which can complicate efforts to acquire state-of-the-art technology.

The story quoted people familiar with the situation as saying Hollysys obtained some signaling components from Japan’s Hitachi Ltd. Executives from Hitachi were quoted as saying they designed some systems sold to Hollysys with “black box” designs to prevent copying. A senior Hitachi executive said: “It’s still generally a mystery how a company like Hollysys could integrate our equipment into a broader safety-signaling system without intimate knowledge of our know-how.”

Hollysys declined to comment then. A spokeswoman couldn’t be reached on Wednesday. During a conference call with investors last month, Hollysys Chairman Wang Changli and another executive suggested that rail signaling business will take a back seat to the company’s other businesses. Their comments suggested the focus has shifted toward the company’s traditional but lower-profile, lower profit-margin factory automation business, where executives said projects happen more quickly than in rail and there are more potential clients.

In fact, factories – not trains – underscore Citigroup’s bullishness on Hollysys.

“From an investor point of view, the more fundamental value comes more from the factory automation business than its rail business,” said Citigroup’s Mr. Gong. He said railway news has driven the stock price this year but its underlying business has been overlooked by investors.

Mr. Wang said in the Hollysys conference call China’s high-speed rail signaling business had “substantially slowed down,” noting that he looked forward to the government’s final report on Wenzhou, “so we can gain some visibility” about the sector.

“We are cautiously optimistic on continuous revenue generation from China’s high-speed rail segment for the next few years,” Mr. Wang said. He also said the company intends to export its rail equipment and become “one of the leading international signal players.”

Even so, it may become more difficult for investors to gauge how Hollysys does in high-speed rail because the company also said that effective with its fiscal first quarter of July, August and September, it had re-categorized how it books revenue in high-speed rail.

High-speed rail will be lumped together its subway-related business. Mr. Gong estimated its main high-speed signaling product represents about 10% of Hollysys revenue.

–James T. Areddy. Follow him on Twitter @jamestareddy

China’s economy during the past 30 years has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy that has a rapidly growing private sector and is a major player in the global economy.

In 2009, China announced that by 2020 it would reduce carbon intensity 40% from 2005 levels.

China is the world’s fastest-growing major economy, with an average growth rate of 10% for the past 30 years.

Some economists believe that Chinese economic growth has been in fact understated during much of the 1990s and early 2000s, failing to fully factor in the growth driven by the private sector and that the extent at which China is dependent on exports is exaggerated.

The country is one of the world’s largest producers of a number of industrial and mineral products, including cotton cloth, tungsten, and antimony, and is an important producer of cotton yarn, coal, crude oil, and a number of other products.

China has acquired some highly sophisticated production facilities through trade and also has built a number of advanced engineering plants capable of manufacturing an increasing range of sophisticated equipment, including nuclear weapons and satellites, but most of its industrial output still comes from relatively ill-equipped factories.

China’s ongoing economic transformation has had a profound impact not only on China but on the world.

China now ranks as the fifth largest global investor in outbound direct investment (ODI) with a total volume of $56.5 billion, compared to a ranking of 12th in 2008, the Ministry of Commerce said on Sunday.

From January to June, the ODI in financial sectors was up by 44 percent to $17.9 billion, and in July alone, the ODI recorded $8.91 billion, the highest this year.

It also aims to sell more than 15 million of the most fuel-efficient vehicles in the world each year by then.

In large part as a result of economic liberalization policies, the GDP quadrupled between 1978 and 1998, and foreign investment soared during the 1990s.

Even with these improvements, agriculture accounts for only 20% of the nation’s gross national product.

China is the world’s largest producer of rice and wheat and a major producer of sweet potatoes, sorghum, millet, barley, peanuts, corn, soybeans, and potatoes.

Horses, donkeys, and mules are work animals in the north, while oxen and water buffalo are used for plowing chiefly in the south.

Growing domestic demand beginning in the mid-1990s, however, has forced the nation to import increasing quantities of petroleum.

There are large deposits of uranium in the northwest, especially in Xinjiang; there are also mines in Jiangxi and Guangdong provs.

Hydroelectric projects exist in provinces served by major rivers where near-surface coal is not abundant.

Before 1945, heavy industry was concentrated in the northeast (Manchuria), but important centers were subsequently established in other parts of the country, notably in Shanghai and Wuhan.

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Time to Step Aboard China’s Rail Investments

Author: Shinji Takagi, Osaka University

Financial integration can be defined in several ways. But the only relevant definition, in the context of ongoing policy debate in Asia, is in terms of bilateral financial links analogous to the way trade integration is typically defined.

No other definition would highlight the asymmetry between trade and finance in Asia. Indeed, some economies are very open financially, and interest rates and equity prices may be highly correlated across some national borders. Despite this, bilateral financial links in the region are much more limited than bilateral trade links.

In 2009, Asia’s intraregional trade amounted to more than 50 per cent of global trade, compared to less than 35 per cent for foreign direct investment (FDI) and around 6 per cent for portfolio investment. Asia’s so-called market-driven economic integration, therefore, yielded a lopsided outcome. In one sense, this outcome is not surprising. Finance is little affected by distance, whereas for trade distance matters critically. Money should flow to a financial centre that offers the smallest intermediation costs and to a country that offers the highest risk-adjusted returns, regardless of the location.

Even so, regional financial integration remains an important unfinished agenda for Asia. Despite there being no theoretical case for preferring regional to global financial integration, promoting regional financial transactions will have its benefits. As the region integrates in trade and production, information is created through face-to-face contacts and the specifics of economic activities. Given the nature of asymmetric information that characterises financial transactions, such local information is more conducive to making regional financing deals than global ones. If markets and institutions are sufficiently developed, then there should be some ‘home bias’ within Asia favouring regional financial transactions. This should be the case even in situations where global transactions offer absolute advantage. The clear lack of home bias in Asia suggests that there are imperfections to be addressed as well as unmet financing needs.

In this respect there are insights to be gained from taking a close look at the cross-border financial links of Japan, the region’s largest creditor country. In 2009 Japan’s intraregional trade with Asia was more than 40 per cent of its total global trade. In contrast, Asia’s share in Japan’s financial transactions was only 24 per cent for FDI assets, and was even smaller, at less than 9 per cent, for FDI liabilities. The importance of Asia was almost negligible for portfolio investments: 8 per cent for equity assets, 1 per cent for debt assets and l.7 per cent for equity liabilities. The exception is Japan’s debt liabilities, where Asia accounted for 18 per cent at the end of 2009. This indicates that Asian investors are active participants in Japan’s large bond market. In terms of cross-border banking flows, Asia’s share was only 7 per cent, broadly similar to the share in total global cross-border bank claims. This suggests that Japanese banks differ little from other international banks in their lending behaviour towards Asia. In short, Japan’s financial links with Asia are much weaker than the links with North America and Europe, though Asia is by far the most important trading partner.

The pattern of investment activity points to a few possible factors to explain Asia’s lopsidedly small share in Japan’s financial transactions, and hence the lack of regional financial integration within Asia. First are the underdeveloped and small domestic capital markets. Second are the capital account restrictions that limit the scope for two-way capital flows. Third are the licensing and other regulatory practices that discriminate ex post against the cross-border activity of Asia-based banks.

Accordingly, in order to promote regional financial integration, the authorities of many of the region’s economies must develop their domestic capital markets further, and make them deep, liquid and efficient. They should also ease or remove controls on the ability of residents to invest abroad. And finally, they should relax the regulatory barriers on the entry of foreign banks, especially those from within the region. Because Asian financial systems remain largely bank-based, promoting this cross-border activity would be especially important.

Undoubtedly part of the limited financial integration we now observe in Asia is related to the stages of development of many of the economies. Regional financial integration is bound to deepen to a level more commensurate with trade integration as Asian economies grow, per capita incomes rise, and financial wealth is accumulated.

Even so, some of the identified gaps require remedial action by governments. This is likely to be a long process because it involves institution and capacity building. Regional cooperative efforts may be needed to safeguard the process of capital account liberalisation and to relax the licensing standards for Asia-based foreign banks. Similarly, regional cooperation may be useful in setting common standards for domestic capital markets and cross-border issues of financial products. In the long run, a region-wide consolidation of domestic capital markets may help create a market with the size, depth and liquidity that is sufficiently attractive to large international and regional investors.

Shinji Takagi is Professor of Economics at the Graduate School of Economics, Osaka University, Japan.

This article appeared in the most recent edition of the East Asia Forum Quarterly, ‘Asia’s global impact‘.

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Asian financial integration: an unfinished agenda