Law, Policy & Markets
Law, Policy & Markets
Geopolitics and 2025 Market Forecast: The View from Asia
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In this episode of the podcast, host Allan Marks sits down with Milbank partner Jacqueline Chan to discuss their 2025 predictions for geopolitics, trade in Asia, climate impacts on investments, and cross-sector market trends, plus Ms. Chan’s thought-provoking book recommendations to read in the new year. They also looked back at how much has changed since they recorded their first Law, Policy & Markets podcast episode together five years ago. A lot has changed in the world since 2020.
About the speakers:
Jacqueline Chan is a partner in Milbank’s Singapore office, previously based in Hong Kong. She advises on a wide range of international corporate finance transactions and M&A deals, and regularly represents sponsors, borrowers and lenders on complex cross-border acquisition finance transactions. In addition, she has significant experience with international debt restructurings in Asia. Ms. Chan specializes in structuring complex debt and equity transactions for clients both within and outside of Southeast Asia, and regularly advises many of the largest private equity funds, sovereign wealth funds, corporates, leading banks and financial institutions in their various transactions globally and in particular throughout Asia.
Allan Marks is one of the world's leading project finance lawyers. He advises developers, investors, lenders, and underwriters in the development and financing of complex energy and infrastructure projects around the world, as well as acquisitions, restructurings and capital markets transactions. Many of his transactions relate to sustainability and innovative clean technologies. He is a Senior Fellow at Columbia University’s Center on Sustainable Investment and teaches law at both the University of California, Berkeley and UCLA. He previously taught project finance at UC Berkeley's Haas School of Business.
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Disclaimer
Law Policy and Markets. I'm Alan Marks. Today I'm joined by Jacqueline Chan, a partner in Milbank's Singapore office, specialising in project finance, corporate finance, m&a and private equity transactions.
Speaker 2And I think the US is doing extraordinarily well in terms of its own economy, and that's driving a lot of changes around the world in terms of the emerging market economies and how they're coping with that, with near-shoring of trade, the slight breakdown of global trade, the increased use of tariffs and protectionism, and the world order is changing at this point in time.
Speaker 1Let's get to it. A lot has changed in the world since 2020. We'll look in a minute at what 2025 might bring for financial markets, global trade, climate change and geopolitics. I asked Jacqueline Chan in Milbank's Singapore office to talk with us today about these issues, not just because she's insightful and smart and a friend, but also because it brings us full circle. The idea for the Law, policy and Markets podcast was born when I was talking by phone with Jacqueline in March of 2020 about the nascent spread of COVID-19, the new pandemic that was just starting to spread around the world. I thought our phone conversation was so interesting. I asked Jacqueline if we could talk again and record it for a new podcast I was thinking of launching.
Speaker 1The second wave of COVID had just resulted in lockdowns in Singapore. No one knew how long it would last or how bad things would get. We certainly did not yet have vaccines or effective therapeutics. Whole economies were shutting down and governments were taking widely divergent responses to the uncertain situation. It was clear to me right away that what Jacqueline was experiencing in Asia would, in just a few weeks, reach the US and Europe. She could give us a peek into the future Rather than sitting home alone, bemoaning the fact that we were now isolated and I was no longer traveling around the world or back and forth between LA and New York to see people in person. I wanted a way to touch people digitally. The podcast seemed like a good way to check in on my law partners and other experts around the world to learn what they were seeing in their areas of practice, in their markets, in their fields of expertise, and to share that with them, with clients, with investors, students, government advisors and anyone else who is interested in what's happening, what it means and what's next.
Speaker 1That first conversation I had with Jacqueline was so interesting to me. It became episode three of season one when we launched the podcast in May 2020. So I thought it would be interesting today to come back to her and to look at what's changed in the last five years and where we're going now in 2025, given all the ongoing changes and the new uncertainties in the world today. I hope you enjoy my latest discussion with Jacqueline now. Jacqueline, thank you very much for taking the time to get together today. Absolutely, this is going to be fun. It is going to be fun and I got to say, the fun thing is people don't know this. This podcast started. We dropped our first episodes in May, the beginning of the summer in 2020.
Speaker 1When you and I were talking in February of 2020 about this thing some kind of a virus, something COVID that was spreading and there were people were locking down offices and shutting things down and it was happening in Asia first and you and I were talking about it and I thought, my God, that's going to happen here in North America in a month or two. We should record a podcast about this, because we're all sitting home alone and kind of wondering how to connect to people. And we recorded that. I recorded with Fiona, with a few others, and then we dropped them all that summer and the podcast started. A lot has changed since you and I first talked about this. It's almost five years ago.
Speaker 2What's changed? For a start, since then, I think I've learned what a podcast is because I listened to so many during the pandemic. But when we first started, I just recall being completely clueless what all of this was about. So much has changed. I remember recording the podcast on my Apple earphones in the middle of my kitchen and trying to figure out what you meant by better sound quality and we were just echoing a little bit because I had no idea.
Speaker 2And since then, now, with podcasts being as ubiquitous as they are, my son was like you recorded a podcast and you didn't go into the closet to record it. What are you doing? So obviously everything has changed and the world has changed really.
Speaker 1Well, we all started living on Zoom and Teams and Google Meet and what have you? I mean the idea of working remotely five years ago.
Speaker 2yeah, we could do it, but it wasn't the preferred route and certainly wasn't as common as it's become and the comfort level we have now is the ability to get things done. The knowledge that we can get things done while still working apart has obviously grown, Although I do think that there is obviously a bit of a U-turn back and a stronger desire now to see people in person and the recognition of the micro, of the benefits that those micro connections make when you see each other in person. But I think that's slowly coming back. I wish it would come back a bit faster, but I think that's just me.
Speaker 1Oh, it's not just you. I was talking to a friend who's a commercial real estate broker and he was saying how in parts of cities that have still some kind of walkability and restaurants or bars that have somehow survived or now even maybe thriving, some new ones and things that the office buildings there are now getting back to almost to normal, although overall in the market there's still a lot of vacancies. But it was led by law firms. Law firms were the businesses where people were kind of, I want to say, forced but strongly encouraged to come back to work in person sooner because it was so important for the training, the development and the mentoring of new lawyers. And once people came back together, I mean I think we were more productive in some ways working remotely. But once we're together we're more creative and more collaborative and it's stickier. People then feel loyalty to each other, not just to the institution and to their clients and their clients, of course forged in the wild, but really much in person as opposed to on Zoom.
Speaker 2So it's something that I think law firms in particular, where we do have a huge emphasis on culture, will continue to emphasize going forward. But yeah, I think the pandemic was. I think we all got through that relatively unscathed. The world order has been appended a little bit With that. I think Asia has come up.
Speaker 1Well, let's talk about the world order being appended, because certainly in the last, when you and I talked well, we talk a lot, but when we last recorded for the podcast in 2020, that was before Russia invaded Ukraine. It was before some of the wars in Africa spread. It was before the Middle East on October 7th and its aftermath, syria. I mean, there's just so much that is changing or has changed.
Speaker 2It continues to change. Really, who knows where it's going to end up. But obviously I think, looking at it and I think we spoke about it from the perspective of Asia-Pacific, I think parts of Asia came out of the pandemic relatively unscathed from a health perspective or from a population perspective, but I think the global economic conditions and just how the world order shifted and the global economic conditions really had an impact in Asia-Pacific. I think obviously China it has struggled coming out of the pandemic and continues to do so as it remakes its economy, and I think the US is doing extraordinarily well in terms of its own economy and that's driving a lot of changes around the world in terms of the emerging market economies and how they're coping with that, with near shoring off trade, the slight breakdown of global trade, the increased use of tariffs and protectionism, and the world order is changing at this point in time.
Speaker 1What does that mean, then for you're in Singapore? What does that mean for Southeast Asia vis-a-vis China and to some extent? For example, if there was a trade war, maybe prompted by tariffs that the next US administration has threatened to impose and so forth, that are targeted in particular at China, not just at all imports, that could move manufacturing to Thailand, to Vietnam, to other areas that might in some ways, maybe indirectly, benefit from that tension. By the same token, tension between any two great powers is really never very good for the people standing next door to either one of them. How do you see that playing out?
Speaker 2It's a good question.
Speaker 2I think obviously what happened when China went through its economic malaise is that investment in China totally dropped, if not stopped altogether, and instead a lot of that investment found its way into Southeast Asia, both through a diversification of manufacturing but also just in terms of capital seeking a home.
Speaker 2So what we saw was an increased focus and activity in Southeast Asia. A lot of investment professionals moved over to Singapore from Hong Kong. A lot of people started saying Southeast Asia has to be the next place where we deploy. So we saw that increased activity in Southeast Asia and probably my guess is that's going to continue because people will need further diversification. We're going to see a lot more companies rehoming themselves in Singapore as opposed to Hong Kong, I think, at least for the near future, just to allow themselves different bases to trade with the world. So I do think that Southeast Asia has seen far more increased activity. I think Asia as a whole. Just because China used to make up more than 50% of allocations in investment activity, asia as a whole has dropped. But obviously Southeast Asia and of course India has really shot up in terms of its proportion of investment and economic activity from a perspective of global deployment and capital.
Speaker 1You mentioned India. India is a really interesting case to me because obviously it still has population growth to the view that China does not. It has a vibrant economy that has not had a slump in exports, manufacturing or real estate like China has had. Obviously, there's still issues in India where doing business for foreign investors is challenging Intellectual property laws in particular come to mind. But you know, I would not be at all surprised if we see India being mentioned as the next rising major economy, in the same way we talked about China up until a few years ago. In the same way we talked about Japan in the 1980s and 1990s.
Speaker 2I absolutely would expect that to happen, and I think India continues on a tear. It's not stopping its growth. It's not stopping the level of investment that's going in Its capital markets are providing extraordinary opportunities for exits and for further capital growth. I think India definitely has huge potential to keep going. So, and I don't disagree with anything that you said.
Speaker 1So if you look at capital markets and the other types of kind of related or adjacent corporate fields that you practice in, from M&A to finance, I want to give you a hypothetical. Let's say we were talking a year from now and let's say that there have been tariffs raised in the United States and countermeasures and countervailing duties and things raised maybe in China and Europe. Assume that there's a slight not big but a slight trend continuing to de-globalization, but trade volumes are down and costs are up and there's more inflation and the dollar, of course, will spike. In that situation, Interest rates, instead of coming down, as we would have expected them to do faster and lower, instead kind of bottom out or even go back up In the United States and Europe, which has ripple effects to Asia and to Latin America. So there's, for the first time in 15 years, real liquidity constraints and a real dip in the credit cycle. What does that do to volumes and valuations for the deals that you expect to be working on in a year or two from now?
Speaker 2That's a good question. I think if the classic issue right now that everybody would say is that valuations continue to be relatively depressed because of interest rates, is that valuations continue to be relatively depressed because of interest rates and therefore the ability for acquirers to basically to pay the multiples that they want to pay without the leverage that they see to obtain is difficult, and that probably remains true. Now I would say, if you look at the schism in the world, I say valuations compared to the US are significantly depressed and that the US capital markets and where they are right now is creating a premium that is unparalleled anywhere in the world. Now, whether that means that valuations are true in the US versus untrue in other parts of the world or vice versa is a separate point from an investor's perspective. But I do think that because of the premiums evaluations that can be fetched in the US capital markets, in the US private sale markets, you're going to see a continued allocation of capital towards the US, away from the rest of the world, which will exacerbate that issue going forward.
Speaker 2Now, is there a possibility that that changes in the near term? That's a really hard thing to say. Personally, I think it's going to be hard in the near term to see a change in that, just because of the factors underpinning the growth in the US cap, monpinning the growth in the us cap monarchy and the growth in the us economy the strength of the us dollar. But never say never. You nobody knows, and I think time will tell. If the us dollar were to drop, if if the stock market were to correct itself and valuations and somehow and something were to change along those lines, then possibly you'd see a more, a reallocation of capital again to other parts of the world. I don't see that happening in the next year or two, so I think this is the status quo for the time being all right.
Speaker 1So here's one, maybe more from left field. If you're sitting in the singapore airlines business class lounge at the airport and overhearing some conversations and people are talking about what the current trajectory in the United States politically, in China, economically and politically, the onshoring, particularly in the United States, of, for example, semiconductor manufacturing, which was stimulated by some of the laws that Biden passed, including especially the CHIPS Act and some of the trade policies then that Trump might undertake. And then you also look at the continuation of the war, with Russia's invasion of Ukraine and some of the state collapse in the Middle East the state collapse in the Middle East. My question is coming back to Taiwan and whether you think there is it is likelier or less likely that there would be a change in the situation between China, taiwan and the United States as a result of any of these trends, or is it status quo?
Speaker 2I'm one of those in the firmly the camp of I think it's status quo. I one of those in the firmly the camp of I think it's status quo. I just don't see thought from a deliberate attempt to force a hand. I just don't see that there's any benefit to be gained for a military invasion and I don't think that I don't believe that that invasion and I don't think that I don't believe that that formulation of that calculation is ever going to change anywhere in the near term. I just don't see that. I think there are bigger issues surrounding the South China Seas in which I think the status quo could be adjusted.
Speaker 1And that's especially between China and the Philippines.
Speaker 2China, the Philippines, china, vietnam yeah, all of those countries and China's making far more aggressive moves in those areas. The saber-rattling it does in Taiwan is kind of status quo. It's always been doing that, it's always going to continue to do that. Is it ever going to escalate into something? Unless it's provoked? I can't see why it would want to do that. It doesn't need to do that. It's got other priorities that it's looking at.
Speaker 2The South China Sea is a problem that's been going on for more than 50 years, if not 100 years. It dates back to an 1842 map that China has. 100 years, it's good. It dates back to an 1842 map that china has. So it's that it's. Taiwan is an issue for them, but not the issue. But I and I was at a meeting once with some chinese delegates and this is in no way definitive, but they just said that. They very categorically said that there is no intention of that part, but they're being provoked to do so and they want the world to know. So who knows where the truth is? But I don't see the calculation ever working in their favor of military invasion, and I think they know that too.
Climate Change & Book Recommendations
Speaker 1Yeah, Okay, so let's pull back from geopolitics.
Speaker 1I want to ask you another question, if I could, because I'm mindful that in the last five years, since we recorded the very, very first episode of Law, Policy and Markets that climate change and ESG and things that people would talk about in, I think, maybe more confident or hopeful or optimistic ways five years ago Now there's, at least in the US context, certainly a lot more polarization around ESG, Whatever acronym or label it takes on.
Speaker 1In the future probably will change. But looking at climate in particular, we've seen greenhouse gas emissions in the last five years globally increase. They have not gone down despite rapid and really huge investment in Asia, in the Americas and in Europe in clean and renewable energy sources, in part because power demand keeps going up and so that's a big deal, and in part because a lot of the countries that are modernizing we mentioned India before and are still making investments in clean energy are also still relying on coal or, in the case of some parts of Southeast Asia, on natural gas in ways that perpetuate some of the emissions challenges. As you're thinking as far as how investors or lenders are approaching climate concerns changed in the last five years and are you more or less optimistic about the next five?
Speaker 2Yeah, it's a good question. So I think what we've seen in our part of the world is that there continues to be a focus by lenders on satisfying and conforming to the ESG principles. That it continues to be a focus and it continues to be something that needs to be met here. I think the countries around the regions where I live and where I work continue to be focused and continue to actually consider ESG goals as important. I think it helps that we're probably suffering the most in terms of climate change. I think we've computed that and I live on the equator, so any one degrees in rise of temperatures is keenly felt and every year we feel it going up. So we absolutely are conscious and we can see and feel the impacts of climate change. So I think it is taken very seriously in this part of the world and that's not changing.
Speaker 2And I think everybody's looking into renewable energy sources. People are trying to move away from coal, even though India and China continue to use coal. I think their share of power generated by renewable energy sources is actually very significant and continues to grow, and even though with the increased power needs. But their investments have been going into renewable and clean energy and that's, for example, if you look at India, that's a huge part of the investment crisis at this point in time renewable energy and infrastructure. So I do think in this part of the world, it's going to be increasingly important. Everyone needs to find a solution to that.
Speaker 2Singapore has announced massively ambitious plans to secure the country for a client flow for the individual effects of climate change rising tide waters, increased heat and they've been investing significantly in technology and hardware and just really interesting ideas to try to try and safeguard the coastal areas, and we expect that that's going to be continuing across Jakarta's. Indonesia's moving its capital because of the flooding that suffers, and so it's going to. It's definitely still continues to be a matter and for the lenders here, for the investment community and, I think, particularly more importantly, for governments. I think governments are focused on climate change and take it very seriously here.
Speaker 1I think, though, you're kind of hitting on a really important point, which is that for countries unlike China or India, the United States, europe, which are historically large or currently large emitters of greenhouse gases, there's a lot of other countries, wealthy ones like Singapore, other ones like some of the small island states in the Pacific, that are not the source of lots of emissions, but they are directly impacted by the effects of climate change, and, as a result, of course, a lot of that investment is going to be directed mostly toward adaptation and trying to figure out, as you say, moving capitals in Indonesia or building seawalls where that's possible, but trying to find ways, to the extent possible, to mitigate the effect of climate change, as opposed to mitigating the cause of climate change.
Speaker 2Yeah, absolutely, and I mean we know of places, like we all know, like we've heard that Maldives, which, under the current rate of climate change, expects to be underwater in like 50 years or so, and how they've purchased land in Africa to move the entire country and population if they have to. It's an interesting solution, but I think a lot of these small countries and COP26 refer to it as well but are suffering the effects of climate change, but have not contributed to it, and they just need to find ways to adapt.
Speaker 1Last question, totally different, but I know from you and I talking many times over the years. I'm curious what book is sitting on your nightstand that you're enjoying reading or that you keep intending to read because you want to, because it looks so good, or what book in the last year you've read that had a big impact that you would recommend. What book or books are kind of for the end of 2024 and looking at 2025, what's a book you'd recommend?
Speaker 2This is a really embarrassing question because it says so much about mindset and all of that.
Speaker 2But actually I focus on three different types of books. So one book I've really enjoyed which I think I got to a little late because I think that everybody else has gotten to it was actually James Clear's Atomic Habits. It was a great reminder to sort of just focus on a 3% increase in improvement in anything on a daily basis and just basically just small little steps rather than focusing on big goals, just focusing on the process and getting yourself a little bit better. And I found that invigorating and easier and gave me a little bit of a sense of control and purpose. And I use that actually in just basically things like improving my exercise routine or something like that. And it's actually been really, really helpful and for me, a bit of a game changer and just trying to like get myself realizing that if you broke things down to smaller steps and focused on small goals rather than achieving massive goals, you would find it much more achievable and you got somewhere in the end, rather than considering yourself not being able to get to what you're hoping to get to.
Speaker 1So what's harder for you, then? Is it building the good habits or breaking the bad ones?
Speaker 2Oh, definitely, I don't think I've ever broken the bad ones. I focus on building the good ones. That's definitely where I focus on.
Speaker 1Okay, so James Clear Atomic Habits. James Clear is Atomic Habits.
Speaker 2James Clear's Atomic Habits, and then I'm actually about to start. Somebody recommended this to me and I'm kind of fascinated by it. I love geopolitics and I love the implications of how the past shapes the present and the future, and I think there's a lot of lessons to be learned, or just lots of things to understand, which everybody has. History is told by many different voices, and it's important to listen to them. So someone mentioned to me that I should read the Jakarta Method, which is a book by Vincent Bevins about basically what happened in Indonesia during the 1960s and the anti-communist actions around the world. So that's something that's on my nightstand right now and I'm hoping to get to at some stage. It's a really heavy read, and so it's not something that I take lightly, so I'm hoping to find some clear days and some clear minds to be able to start reading that.
Speaker 1I got to tell you that is a really, really good choice. I mean, and it'll be a hard read, but this idea of mass killings as a foreign policy tool.
Speaker 2I don't even want to like. It's just a hard. I know I'm stealing myself for a hard read, but I think it's it's important to understand the history and just where it comes to, so you can either avoid it or just or identify it if you ever see it again, right.
Speaker 1Yeah, yeah, oh, for sure, for sure, for sure. Yeah, what is it? Those who don't study history are condemned to repeat it exactly, exactly.
Speaker 2And then the last thing I tend to find myself reading which is on planes and if I've got like a couple of minutes, are just trashy detective novels, so so, and I have them on my kindle and I've got a couple like 30 minutes, I'm like, and I don't want to look at my computer anymore. I'm like that's a good way to like just unwind and read, and, and so I love reading. It's this, it's this, it's this particular, it's this particular author who, who writes from montreal actually, and her name is give me one sec, it just escaped me right now. Her name is Louise Zwarte. Louise is just going to come to me for a second. Louise Penny, yes, that's right. Thank you, louise Penny.
Speaker 1And I love her books. That was a lucky guess. That was a really lucky guess.
Speaker 2You could. You're really good. So yeah, I absolutely love her books and she's kind of like my guilty weed, my guilty pleasure when I'm on planes. I just get through her books really quickly.
Speaker 1Well, it's a good thing you live in the equator, because that's good beach reading year-round.
Speaker 2Exactly, I really enjoy that.
Speaker 1That's wonderful. Well, thank you so so much for taking the time to kind of reminisce about and also to project where we're going, because I think it's somebody wants to see. I heard a guy he's actually very smart and analyst of geopolitics and he said look, I'm always set up when people say we're at an inflection point or this is a watershed moment or whatever the metaphor is for sudden change, cause he says things end up actually being usually not all that clear or definitive as to part of their impact goes. But it does feel like we are at a point where there's maybe a fork in the road and it will be interesting to see what the next few years bring. But I really thank you for taking the time to share your thoughts about it and I look forward to seeing you in person soon.
Speaker 2Absolutely, alan. Thank you so much for letting me join this and such a journey. I mean I can't believe where we've come to after this. Like there's that late night call in my kitchen walking around.
Speaker 1You were the impetus. I said, oh my goodness, we have to record this conversation, especially since we can't get on the plane and go see anybody anytime soon.
Speaker 2It's just amazing to see where you've come to. Thanks so much, Alan. Really amazing job at this. Thank you so much.
Speaker 1Okay, thank you. Thank you for joining us on another episode of Law Policy and Markets Milbank Conversations. Follow us on your favorite podcast platform and learn more at milbankcom.
