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North Asia’s reopening gains speed

Chief Economist, ANZ

2023-02-26 05:30

There’s positivity across businesses in South Korea, Taipei and Hong Kong in the wake of recent watershed post-COVID opening, including a relaxing of mainland borders and the lifting of mask mandates.

In many ways North Asia's reopening has lagged the rest of the world, but now the sense of excitement, even celebration, is palpable. 

As that sense fades, the focus is likely to turn toward two themes already dominating discussion among business leaders and investors: interest rates and geopolitics. 



On interest rates, for investors, the overwhelming issue is when the Federal Reserve will reach its limit on interest rates – the so-called ‘terminal’ level.

Here the use of the term implies peak and then decline. I think that needs a reassessment. Most of the increase we’ve seen is likely to be quite persistent - and peak rates are not likely to decline very much for quite some time.

Many investors are more concerned about peak interest rates exceeding current market pricing, rather than undershooting it.

Interest rates are a challenge, no doubt, and a substantial focus. But demand is not. Dealing with the cost of materials, striking the right balance on labour, and even managing the risks around geopolitics seem to dominate corporate decision-making process at present. Shortages of demand still don't seem to be a material concern. That’s good news.


Geopolitics is still a focus for both investors and businesses. Without doubt, the deterioration in the geopolitical environment has thrown some sand in the gears of the global economy and forced some adjustments.

But there are opportunities here which risk being missed. While some relationships are being tested, some are being recalibrated and others will be strengthened. We should not overlook the value of the latter two points.

Views on China’s economy in the region are quite divided. Some expect a robust consumer-led recovery in 2023, and others expect more meagre growth. ANZ is in the robust-recovery camp.

Lastly, environmental, social and governance (ESG) factors remain a growing theme. Europe has no doubt led the world in ESG, but Asia is now moving with haste. ESG has become a regular part of the dialogue with both businesses and investors.

Richard Yetsenga is Chief Economist at ANZ

He has spent a week meeting with investors and business leaders in North Asia

North Asia’s reopening gains speed
Richard Yetsenga
Chief Economist, ANZ


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