2010 is the year that emerging markets economies, particularly in Asia, will show the world how they are far less dependent on Western developed nations than they used to.
While the world economy fell in unison during the financial crisis, there have been stark differences in economic performance during the rebound. The U.S., Europe, and Japan, are rebounding but their expected growth is tepid due to lingering debt overhangs and unemployment which could take years to shake off.
Meanwhile, emerging Asian nations are going gangbusters. The WSJ chart below highlights how stark the difference is when it comes to GDP growth. Note how China and India have just kept growing throughout.
Yet most telling is the cause of Asia’s relative strength. How come the strong rebound despite continued weakness from the U.S. and European consumer? It’s due to the emerging market consumer, who has now dethroned the American consumer as the #1 growth driver.
WSJ: The other countries in the neighbourhood [of China] are benefiting, offsetting some of the weakness in exports to the U.S. by exporting more to China or drawing more tourists from China. Among Asian economies, those more tightly linked to China—such as Taiwan, Malaysia, Singapore—have been growing fastest. But Asian consumers are doing their part, too. Auto sales in Malaysia in January were up 33% from a year earlier, for instance; India’s were up 50%. In contrast, U.S. vehicle sales were up only 6% in January.
Indeed, one milestone passed without much notice during the crisis. Emerging-market consumers, more numerous and better off than they were a couple of decades ago, outspent American consumers for the first time in modern history.
When anyone speaks of Asian economic decoupling from the West, it has to be clarified that decoupling is a matter of degree. Surely Asia will never be completely immune to what’s happening in the U.S. and Europe. Yet it’s clear that Asia has becoming increasingly resistant to problems in the West, to the point that it can show robust growth even while the developed world remains in crisis. That has to fit at least some definition of decoupling.