Economist: Asia's astonishing rebound

the Chinese govt just announced that they would focus on maintaining growth rather than reducing inflation. That means they'll keep buying US debt to allow them to maintain the renminbi peg where it's at now.

Re: dollar as reserve currency...where would FCB's put their money other than the US? Euro...I don't think so...EU has worse deficits, bigger inflation problem, and is recessionary, along with demographic time bomb. Yen...nope...everyone's been shorting the yen and yields on JGB's are zilch. Plus Japan's national debt is sky high.

Interesting article on this week's Economist.







IT NEVER pays to underestimate the bounciness of Asia’s emerging economies. After the region’s financial crisis of 1997-98, and again after the dotcom bust in 2001, outsiders predicted a lengthy period on the floor—only for the tigers to spring back rapidly. Earlier this year it was argued that such export-dependent economies could not revive until customers in the rich world did. The West still looks weak, with many economies contracting in the second quarter, and even if America begins to grow in the second half of this year, consumer spending looks sickly. Yet Asian economies, increasingly decoupled from Western shopping habits, are growing fast.

The four emerging Asian economies which have reported GDP figures for the second quarter (China, Indonesia, South Korea and Singapore) grew by an average annualised rate of more than 10% (see article). Even richer and more sluggish Japan, which cannot match that figure, seems to be recovering faster than its Western peers. But emerging Asia should grow by more than 5% this year—at a time when the old G7 could contract by 3.5%. Western politicians should brace themselves for more talk of economic power drifting inexorably to the East. How has Asia made such an astonishing rebound?


Out of smoke and mirrors, say some Western sceptics. They claim China’s bounceback is yet another fake. The country’s numbers are certainly dodgy: the components of GDP do not add up, and the data are always published suspiciously early. China’s economy probably slowed more sharply in late 2008 than the official numbers suggest. But other indicators, which are less likely to be massaged, confirm that China’s economy is roaring back. Industrial production rose 11% in the year to July; electricity output, which fell sharply last year, is growing again; and car sales are 70% higher than a year ago.

And surely the whole of Asia cannot be engaged in a statistical fraud. South Korea’s GDP grew by an annualised 10% in the second quarter. Taiwan’s probably increased by even more: its industrial output jumped by an astonishing annualised rate of 89%. India was hit less hard by the global recession than many of its neighbours because it exports less, but its industrial production has also perked up, rising by a seasonally adjusted rate of 14% in the second quarter. Output in most of the smaller Asian economies is still lower than a year ago, because they suffered steep downturns late last year. But at economic turning points, one should track quarterly changes.

http://www.economist.com/opinion/displayStory.cfm?story_id=14214001&source=hptextfeature