Asia One Year After Lehman Bros Collapse

The economic crisis that followed the collapse of Lehman Brothers has been termed one of the worst since the Great Depression of the 1930s. But while the United States continues to post poor consumer spending figures and depressing jobs data, the Asian economies have already started looking up.

Kyohei Morita, the chief economist at Barclays Capital in Tokyo, explained that “the reason why Asia could be the source of recovery for the global economy is because they were basically the beneficiaries of the global economic policies taken by the major economies especially. The most notable example is the stimulus of the purchases of cars or autos or electrical appliances because Asia can be regarded as the factory of these goods.”

Quick response to crisis

Ashok Charan, a professor at National University of Singapore, added that the Asian governments, especially Beijing, are recovering because they reacted very promptly. Especially, China which “was very quick to respond to the crisis with a very large and substantial stimulus package by the government. They were the first to show signs of bottoming out. The developing world -- China and India -- are doing a bit better.”

Charan also thinks that increased domestic spending in the region has helped the Asian economies recover faster than their Western counterparts:

“The biggest potential for the government in particular was through triggering the domestic consumption because the Chinese had amassed a huge sum in terms of savings. The total savings in private and corporate in public China was to the tune of about 4.3 trillion US dollars which, compared to any other large economy, was really huge. Traditionally, Chinese have had the propensity to save.”

Emerging middle classes in China and India

Recently, the World Bank lauded China for its measures that prevented the crisis from getting worse. “China as a whole continues to grow at 8 percent and India is expected to grow at 5.5 percent,” Charan explained.

“Over the years, in any case for the past 10 to 15 years, and this will go on for the future 10 to 20 years, both China and India have witnessed the emergence of the middle and upper middle class. We Asians are after all about 60 percent of the world’s population in terms of size and diversity and we are rapidly urbanising,” he added.

Kyohei Morita of Barclays Capital in Tokyo agreed: “We still have at least 15 years of population growth without aging. I would say that the savings ratio will not fall -- at least over the coming 15 years.”

“It may take a few years before the US becomes as large a market as it was,” warned Charan. “So some realignment may take place and may go beyond Asia, Brazil and Russia as well. Asia is not just China and India -- there’s Indonesia, which is clearly doing pretty very well at this moment and there’s Vietnam, which is growing faster.”

Although the Asian economies have shown signs of a speedy recovery from the crisis, experts warn that the consequences of the financial crisis will be long-lasting.

Author: Pukhraj Choudhary
Editor: Anne Thomas