Zoo Station

Andy Mukherjee has written a column at Bloomberg.com that addresses why the U.S. and Europe seem to have failed to notice both the $9 trillion Asian economy and its increasingly prosperous consumers. This may seem strange given the amount of newsprint being consumed by stories on India and China, but the fact is that when it comes to strategic planning, Asian concerns are probably still peripheral to the giant multinationals.

Asian nations' $9 trillion gross domestic product grew 5.2 percent last year, the fastest since 1990. After rising for five straight years, the region's current account surplus now exceeds 4 percent of its GDP, the UBS study said. Asian countries in general aren't importing enough goods and services to compensate for European and U.S. purchases of Asian- made items such as trousers and TV sets. ``This isn't what you would expect from a region expanding faster than the U.S. and more than twice as fast as the EU,'' Anderson said. "A booming Asia should be pulling the rest of the world along with it -- resolving U.S. imbalances and promoting EU growth by purchasing more goods and services." Since Asia is running a current account surplus, demand in the rest of the world is pulling up Asian growth. The gap also implies that Asian nations are exporting capital, typically through their central banks' accumulation of U.S. securities.

India, the world's second-fastest growing major economy after China, last week announced a reversal of three years of current account surpluses with a small $6.4 billion deficit. So it's doing its bit for world growth. However, with a $661 billion economy, of which trade accounts for just 27 percent, India doesn't help much yet, UBS said. Unlike India, China's $1.65 trillion economy is in a position to help. Re-exports of imported components account for about half of China's overseas shipments. It's this "processing" trade that's grossly tilted in China's favor. Only considering China's "domestic" trade -- exports of what it makes locally minus imports of what it consumes within the country -- China ran a trade deficit from 2002 until mid-2004, the UBS study said. Right now, China is in a bind. Its "processing" trade is accelerating. At the same time, "the combination of surging excess capacity in overheated sectors has turned a rising trade deficit at home into a strong surplus," UBS's Anderson explained. China had a $30 billion trade surplus in the first five months of 2005, compared with a $9 billion deficit in the same period last year.