Thursday, September 25, 2003
Asia Rising
(via Rajesh and Brad) Martin Wolf of the Financial Times wrote an excellent article on Sept 21st called "Asia is Awakening," on the inevitable rise of Asia as an economic powerhouse, especially the east and the south. In fact, Wolf labels the 21st century as Asia's century.
What, then, might such a rise imply? Consider three possibilities.
The first is that, as it industrialises, China will shift the terms of trade decisively against manufactured goods, particularly labour-intensive manufactured goods, in favour of primary commodities (oil, other raw materials and even foodstuffs). This would have a big impact on the rest of the world.
The second is that Asia becomes home to the world's deepest financial markets. Until the 1997 crisis, most Asian countries regarded the financial sector as a conduit for financing industry. They learnt, brutally, that the opening and liberalisation of such a financial sector is lethal. The obvious conclusion is that financial sectors need modernisation. That has started, but much more needs to be done. When it is, the new financial sectors will have access to the world's highest savings and most dynamic economies. These will be formidable advantages.
The third is that India also makes the changes needed to generate growth of up to 8 per cent. Should it do so, the speed with which the centre of economic gravity would shift towards Asia could be even more astonishing. Even if it does not, Asia seems certain to become much the most important region within a few decades.
Japan has already made a big difference. But Japan is a country of 127m, still traumatised by its defeat in the second world war. China has 10 times Japan's population and none of its bashfulness. Europe was the past, the US is the present and a China-dominated Asia the future of the global economy. That future seems bound to come. The big questions are how soon and how smoothly it does so.
FT has a paid website, so if you want to access the story, let me know and I'll e-mail it to you as a Word document.
What, then, might such a rise imply? Consider three possibilities.
The first is that, as it industrialises, China will shift the terms of trade decisively against manufactured goods, particularly labour-intensive manufactured goods, in favour of primary commodities (oil, other raw materials and even foodstuffs). This would have a big impact on the rest of the world.
The second is that Asia becomes home to the world's deepest financial markets. Until the 1997 crisis, most Asian countries regarded the financial sector as a conduit for financing industry. They learnt, brutally, that the opening and liberalisation of such a financial sector is lethal. The obvious conclusion is that financial sectors need modernisation. That has started, but much more needs to be done. When it is, the new financial sectors will have access to the world's highest savings and most dynamic economies. These will be formidable advantages.
The third is that India also makes the changes needed to generate growth of up to 8 per cent. Should it do so, the speed with which the centre of economic gravity would shift towards Asia could be even more astonishing. Even if it does not, Asia seems certain to become much the most important region within a few decades.
Japan has already made a big difference. But Japan is a country of 127m, still traumatised by its defeat in the second world war. China has 10 times Japan's population and none of its bashfulness. Europe was the past, the US is the present and a China-dominated Asia the future of the global economy. That future seems bound to come. The big questions are how soon and how smoothly it does so.
FT has a paid website, so if you want to access the story, let me know and I'll e-mail it to you as a Word document.
