In its latest Outlook, the Asia Development Bank (ADB) states that Asian economies will recover faster than expected – 3.9 percent this year and 6.4 percent in 2010 (estimates just six months ago were at 3.4 percent and 6.0 percent, respectively).
This growth, led by China, of course, was a result of “firm action by many governments and central banks, the relatively healthy state of financial systems prior to the global crisis, and the rapid turnaround in the region’s larger, less export-dependent economies” according to the ADB.
However, the news was not cheery for everyone. In particular, Southeast Asia took a notable fall. GDP is expected to be a paltry 0.1% this year, compared to expectations of 0.7% in March. “Half the Southeast Asian economies are projected to shrink this year, with those most exposed to international trade – Malaysia, Singapore, and Thailand contracting the most.”
Of critical note is that that these economies are the most “open” in Asia.
In the ten years since the Asian Financial Crisis, these countries have painstakingly recharged their economies with an increasing commitment to open trade, free flow of capital and FDI. This is particularly notable in Malaysia’s case given its imposition of capital controls during the Asian Financial Crisis.
Now, these ADB figures may lend yet more credence to the belief in a growing number of public quarters in Asia that free-market economics is not the best way for the region to develop.
For example, as previously discussed in this blog, the newly elected Prime Minister of Japan, Yukio Hatoyama, recently expressed how to “put an end to unrestrained market fundamentalism and financial capitalism…in order to protect the finances and livelihoods of our citizens.”
And in online comments to the ADB report, postings included remarks like: “Dr M[ahathir] was right about the bad risks of total open finance system. Perhaps a lot of people were too but helpless against the intricate nature of exchanging material values.”
This challenge to perceived Western-style capitalism is further accentuated by the strong resumption of growth in China. Compared to ten years ago, when decimated Asian economies could only look to the United States and Europe as the correct model of growth, countries can now observe China’s comparative triumph in responding to the current crisis and its government’s singular role in managing economic development, as the better role model for long-term economic success and financial stability.
Thus, the revival of the decoupling concept, with China leading the way of a resurgent Asia, may have a greater depth beyond the notion of these economies no longer depending on the United States for growth. Rather, it can mark a paradigm shift in overall economic and financial management within Asia – perhaps not quite towards long-awaited financial integration but at least to imitation of a Chinese-styled ideal.
This post was originally published at www.malmora.com/blog and reproduced here with the author’s permission.