With the United States stumbling a bit in this week’s announcement of fourth-quarter GDP, it might be an appropriate time to ask the question, is it Asia that’s leading this global recovery? Generally, I’d agree with an assertion that Asia, particularly China, is somewhat driving the global economic recovery. While U.S. GDP was set back by some one-off issues with defense spending, China saw quarter-on-quarter growth of around 2%, driven by up-ticks in industrial output and a boost in exports late in the year. The smaller Asian economies are also doing very well, but none swings the lead that China does.
When contemplating Asia, it’s important to remember that the economic story in Asia, and above all in China, was one of a real estate and infrastructure boom; that is, until two or three years ago. The story has changed, and what you’re now seeing across Asia is a growing middle class. And with the relative security (financial and otherwise) that a middle-class lifestyle brings, so too comes a shift to consumption. Asia’s economic story is now becoming one of increasing wealth and consumer-driven economies.
And I suspect that increasing wealth comes from a sound basis, particularly from more competitive economic activity. Economies across Asia have embraced a competitive economic structure that Western economies have been using for well over a century. For some economies in Asia, this is a relatively new thing, but what they’re discovering is that a competitive economic structure can lead to a competitive economy. This is what’s given them such good growth, and I think that it’s sustainable for the most part. For that matter, this isn’t a phenomenon localized to just Asia – I think that emerging markets in general are exhibiting this trend, whether you’re talking about China, or India, or Brazil.
I think from here on, you’ll see much more of a consumer-driven economy in Asia. China is very focused on shifting their economy in that direction to help stabilize growth for the future. And I think that growth will continue. I don’t think that trajectory will be as steep as it has been in the past, but it will be essentially quite positive.
So, is Asia leading the global recovery? Probably, but if it isn’t, it’s definitely out in front.