East needs West

Its economic growth might have diverged from the developed world, for now, but Asia is still dependent on the West, according to FinanceAsia readers.
A construction worker at a housing development project in China's Anhui province.
A construction worker at a housing development project in China's Anhui province.

Asia’s quick economic recovery has left some people, including quite a few of our readers, wondering if the once-fashionable idea of decoupling might have had some truth to it.

Before the global financial crisis, Western bankers in the region liked to push the idea that Asia’s economy was decoupling from the US and Europe. It made for a good pitch, but nobody really believed it. Back then, Asia was growing fast, as it is today, but rich countries in the West were prospering too. It seemed hard to believe that one region could continue to grow if the other suffered a slowdown.

Fast forward two years and the global economy doesn't look quite so symbiotic. Asia is growing so fast that policymakers are most fearful of runaway inflation and asset bubbles, while the Americans are desperately trying to create inflation to revive their economy and the Europeans are struggling to protect their currency from collapse.

But the balance of our readers believe, and the general consensus is, that Asia is far from decoupled. Overall, 55% of respondents to our web poll agreed, while the remaining 45% apparently believe that Asia’s economy will continue to grow just fine, even if the US, Europe and Japan all slump for the next decade.

That doesn’t seem likely. Indeed, one of the biggest risk factors to growth in the region, according to Stephen Roach, Morgan Stanley’s former Asia chairman, is a “bump in the road” in the US or Europe.

Asia suffered less during the latest financial crisis and is recovering more quickly, but it is still moving in sync with the rest of the world.

Photo provided by AFP.

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