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Aug 21, 2011

Asia Is Losing the Economic War to United States of the West

  Most scholars believe the Great Recession is the demise of Western capitalism. Some even said the process of decoupling is on the move. I’m an Asian. And my continent is losing the economic war to United States of the West, comprising of United States and Europe.
In my forthcoming book, I argued Asia is not the winner of this economic crisis. They pointed to the impressive growth of China, India, Brazil and other emerging economies in the time of a crisis. In addition, developed economies in Asia bounced back healthily in the wake of global economic crisis. Namely, Singapore, Taiwan and South Korea.
It’s not the case. We are running of ammunitions to weather the storm stoked by the West. As Joseph S. Nye, a veteran political analyst, interesting pointed out:  In 20th century, we talked about the balance of military power. In 21th century, we talk about “Balance of Financial Terror.”
Asia is not knowledgeable enough to play that game. The impressive economic growth in Asia in recent years was mainly the result of stimulus packages. It pushed up the debt ratio. Besides winning the macroeconomic and political stability, there’s nothing we can be proud of.
How about the United States and Europe?  Most people believe that Government of the West robs its own people. Countries are bracing for second wave of currency war. Recently, Japan and Switzerland have intervened to stabilize national currencies. Other currencies considered as safe heaven can’t help to intervene too. Every country has only a choice: To depreciate the currency.
I have written articles about the benefits of economic crises for the United States and Europe.  If you are not sure, please scroll down and read it.  The fighting is Washington has made the dollar become cheaper and cheaper. And QE3 is coming. Asian countries don’t have much power in hands to counter the possible consequences.
If you look at inflation in China and Brazil, it may be impossible for both Governments to print out more money to stabilize the economy should the next wave of destabilizing forces come. Asia is not the loser of the economic crisis too. In my words, Asia is just a continent that used to capitalize on the crises. And that day is over.
America is winning back its manufacturing sector. Investors are moving back to both America and Europe. What we have got is the inflow of hot and bad money, setting the stage for bubble economy.  Most importantly, the West is becoming a more export-driven economy.
 China is shifting its economy pattern, from investment and export driven economy to consumer driven one. It’s clear enough that China is becoming a consumer of the West. Other developing countries are more of the same. In the near future, debt to GDP ratio of developing countries will rise dramatically. Conversely, that of the West will fall down.
I’m very still optimistic that the West will bounce back strongly. This time is different. The west won’t lead the world economy but will depend on one for its growth. Again, we are running for ammunitions. China can do little when US politicians were fighting in Washington. It threatened the values of $ China holds.
We can’t say we are winning the war as our debt is on the rise, export markets are collapsing, our competitors are gaining strengths, and are vulnerable to future shocks from the West. We did capitalize on the crisis.  Did we capitalize enough to offset future losses? It’s anyone’s guess.
I would like to hear your voice. Please share it with me.