By Bloomberg | Updated:
Apr 01, 2017, 08.00 AM IST
People in the West, certainly Americans, have
long had a fascination with the East, with many predicting an inevitable “Asian
century” marked by economic and market dominance. I have long disagreed with
the consensus on China and other Asian Tigers, and others are beginning to
agree. Many problems stand in the way of the “Asian century.”
Japan dazzled Westerners with the speed of its
recovery from the ashes of World War II. Japanese purchases of U.S. trophy
properties such as the Pebble Beach golf resort in California and Rockefeller
Center in Manhattan in the 1980s, on top of the leaping property and equity
prices in Japan, convinced many in the West that Japan would soon take over the
world.
Japan’s economic decline in the early 1990s did not curb
fascination with Asia. It simply shifted to the rapidly-growing developing economies,
the Asian Tigers. The original four, Hong Kong, Singapore, South Korea and
Taiwan, were later augmented by the likes of Malaysia, Thailand, the
Philippines and, of course, China -- and more recently, Pakistan, Vietnam,
Indonesia and Bangladesh.
The late-1990s Asian financial crisis only
temporarily disrupted Western fascination with the East and the prospects for
an “Asian century.”
The 2007-2009 Great Recession and financial
crisis ended rapid economic growth in Western countries and, therefore, the
robust demand for exports that were the mainstay of developing economies.
Still, Western zeal for Asia persisted and many, for no logical reasons,
believed emerging countries could independently continue to grow rapidly and, indeed,
support economic activity in the sluggish U.S. and Europe.
Chinese real economic annual growth rates nosedived from
double digits to a recessionary 6.3 percent during the worldwide downturn, but
then revived due to the massive 2009 stimulus program. Easy credit fueled a
property boom and inflation, and excessive infrastructure spending replaced
exports as the growth engine. As with the Asian Tigers earlier, many thought
Chinese growth was self-sustaining and unrelated to ongoing sluggish economic
performance in North America and Europe, especially after Chinese GDP
topped Japan’s in 2009.
There are five main reasons why it won’t get any
easier for Asia:
1. Globalization is largely completed. There
isn’t much manufacturing in North America and Europe left to be moved to
lower-cost developing economies. At the same time, the West is basically
saturated with Asian exports, and those countries are competing fiercely among
themselves for limited total export demand. Also, exports are shifting among
those countries as low-as low-end production moves from China to places such as
Pakistan and Bangladesh, much as they shifted out of Japan in earlier decades.
As economies grow, a greater share of spending is on services and less on
goods. This reality is a long-term drag on almost all the other Asian lands,
except India, due to their goods-export orientation. This will temper long-term
growth for Asian goods exports even after rapid economic growth resumes in the
U.S. and possibly other Western economies.
2. The shift from being export-led economies to ones driven
by domestic spending, especially by consumers, has been slow. Chinese leaders
want this transition, but it is moving at glacial speed. At 37 percent, Chinese
consumer spending as a share of GDP is well below major developed countries
such as the U.S. at 68.1 percent, Japan at 58.6 percent, and even Russia at
51.9 percent.
3. There are government and cultural restraints. Almost all
developing Asian economies are tightly controlled by governments. Top-down
regimes stoutly resist reform and often persist until they’re overthrown by
revolutions. The current Mao dynasty in China, as I’ve dubbed it, seems
seriously worried about popular unrest due to the lack of promised economic
growth and is reducing what little political liberty was previously allowed.
President Xi is now the Big Brother with lots of little brothers insuring
proper thoughts and actions, even at the local level.
In Malaysia, Prime Minister Najib Razak is
enmeshed in a multibillion-dollar investment scandal. In the Philippines, crime
and drug trafficking are so rampant that President Rodrigo Duterte was elected
on a platform of eliminating drug dealers, even by murderous vigilante squads.
South Korea’s former president Park Geun-hye was thrown out over corruption.
4. Population problems endure. Despite the need
for new workers in Japan as its population falls and ages, women are still
discouraged from entering the labor force, and Japan continues to be
unwelcoming toward newcomers. There’s no such thing as an immigration visa
despite the fact that 83 percent of Japanese hiring managers have difficulty
filling jobs, versus a global average of 38 percent in the last five years.
China
also has a looming labor shortage and severe limits to economic growth due to
its earlier one-child policy, which resulted in about 400 million Chinese not
being born. Low fertility rates are also destined to reduce the populations of
Hong Kong, Taiwan, Singapore and South Korea. At the other end of the
population spectrum are Asian countries like Indonesia and India, whose population
is expected to exceed China’s by 2022.
5. Military threats are growing in Asia, and could severely
disrupt stability and retard economic growth if they flare up. China is
exercising its military muscles by challenging U.S. military influence in the
region by, among other actions, building military islands on reefs in the South
China Sea. Japan is abandoning its post-World War pacifism and shifting from
defensive to offensive capabilities. The Russians are also making military
threats. The region contains five nuclear-armed countries: China, India
and its rival Pakistan, Russia, and -- most troubling -- North Korea, which is
testing long-range missiles. China isn’t happy about that, but it wants North
Korea as a buffer between it and South Korea as well as a deterrent to its old
foe, Japan.
There may well be an “Asian century” in the
future, but don’t hold your breath. It took about a millennium for the West to
develop meaningful democracy, the rule of law, large middle classes that
support domestic economies and and all the institutions that are largely
lacking in developing Asian lands.
Read more at:
http://economictimes.indiatimes.com/articleshow/57954400.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst
No comments:
Post a Comment