Asia in 2010:  Economic Recovery

Getting a clear picture of any economy for 2010 is a formidable challenge.  However, the consensus seems to be that the world will emerge from the global recession and 2010 will be slightly better than 2009.  Within this framework, Asia, with China leading the way, will experience more solid economic recovery than the rest of the world.

According to the International Monetary Fund (IMF) and the Asian Development Bank (ADB), the opinion seems to be that the Asian economies will recover somewhat rapidly, but only after the rest of the word emerges from the recession.  It is conceivable that Asia will show an economic growth of 5% in 2010, which is two times the growth in 2009.  The Asian economic recovery will be tied to the resurgence of the global economy because the Asian countries rely heavily on exports.  Cuts in the interest rate and government spending will enhance recovery in Asia because the banks do not have to cope with the problems they have in the U.S. and Europe.  Also, in the long term, Asia needs to reduce their dependence on exports and stimulate domestic spending, but this will take some time.  Stimulus spending will also be a factor that spurs recoveries in Asian economies, particularly China. 

Japan, the second largest economy in the world, will probably show economic growth of less than 1% in 2010.  China and India, on the other hand, will probably an economic growth close to 6%.  The forecast for China’s growth in 2010 is 7.5% while India’s economic growth is predicted at 6%.

Since China and Japan are the two economic engines that propel Asian growth, I would like to concentrate on some of the factors that will affect their recovery in 2010.

First, China:  In a survey of Chinese business leaders by the Regus firm, the Chinese business community does not anticipate a strong economic recovery until mid 2010.  Forty-eight percent of the Chinese business leaders interviewed felt that their profits would increase in 2010 and 55% predicted an increase in revenues.  It is interesting to note that 65% of the large Chinese companies see an increase in revenues in 2010, while 70% of the small to medium size companies see an increase during the same period.  From this, one can assume that small businesses will drive the economic recovery in China.  The multi-billion dollar economic stimulus program in China had a very positive impact on economic growth and this stimulus will continue in 2010 which could show a GDP growth in China around 10%.  The question is, how long can China sustain this kind of growth, even though China’s exports represent 10% of world trade and it is conceivable that in the next 10 years China can overtake America as the largest global economy.  In 2010, China will overtake Japan as the world’s second largest economy.

Regarding Japan, as I mentioned in a previous article in Business Life, the growth and vitality of the Japanese economy will depend on the policies of the Democratic Party of Japan and their ability to make the changes that are necessary to revitalize the economy.  Japan needs tax reform, so that revenues will increase.  It also needs a change in the way business is managed and a new mechanism for the care of the elderly and stimulating domestic consumption.  Japan’s growth in 2010 will probably not exceed 2%.

So, in summary, 2010 has the potential of restoring a significant recovery in Asia with China leading the way and some resurgence of the world’s second largest economy, Japan.  But, in the final analysis, Asia’s economic growth will be determined by less dependence on exports and increased domestic consumption.
 

Richard King,
Chairman Emeritus of Woodbury University
Director, Pacific Rim Programs at Woodbury University,
Chairman/Founder King International Group
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