The major economies of Asia are recovering faster than those in the West. If they can sustain their present growth and eventually spearhead a global recovery they will have made history. For the first time in modern times, the world economy will have been pulled out of a hole by Asia rather than Europe or North America. The recent burst of growth in France and Germany, for example, has now been traced to a rise in exports to Asia. The brightest spark in an otherwise dismal US export story has been its trade with Asia. The stock markets that are determining global movements are in Asia. Which is why so many around the world are watching to see if Asia can keep it up.
The reason there is still a lot of wait-and-watch involved is the quality of Asia’s rebound. Half the Asian story in the present economic downturn has been China. The Chinese recovery has, so far, been a combination of stimulus and cheap credit. If this mix helps drag other economies out of their troughs, Beijing can claim to have held up half the sky. Even if it does not, China will have shown it counts in the world economy more than Japan, as much as the European Union and just a few point less than the United States. The US remains the biggest engine pulling the global economy: its economy is still three times China’s. But it is now recognised that the engines of the developed West need to work in tandem with those of developing Asia if the world is to see prosperity return. The latter may still be small, but their heft is disproportionate because of their minimal debt levels and sound financial sectors.
India’s primary accomplishment has been to survive the storm, contributing a little to global recovery but contributing nothing to the original meltdown. India still lacks China’s global impact: its economy is half the size and more isolated, its government is debt-laden. What makes India exceptional is the width and breadth of its private sector companies. The latter’s recovery and how they will leverage that is what makes India a potential game-player in a new Asian-ordered world system. It is obvious that Asia is an essential ingredient to a global recovery. The next few months will determine whether it is the only ingredient needed.