Thursday, 22 September 2005

Demand in emerging Asia

Seems like everyone wants emerging Asia, especially China, to boost demand.

The New Economist points to an article on global imbalances in the Financial Times by Martin Wolf (subscription required) that concludes as follows:

The bottom line is straightforward: to be confident of a benign adjustment one needs changes in policies in several places at once. Among the most important elements of such policies are significant movements in real exchange rates, higher savings in the US and higher spending, relative to GDP, in the rest of the world, but particularly in emerging Asia. The result would not only be more balanced global growth, but each region would be better off.

Now, we have this news report that the United States will use G7 talks this week to press China for more currency reform and to boost domestic demand.

Treasury Undersecretary for international affairs Tim Adams said the United States was monitoring the Chinese yuan closely after Beijing staged a small but politically symbolic revaluation of the currency on July 21...

"We're in constant contact with our colleagues in China," he told reporters. "Implied in that support is an expectation that they will indeed follow through on what they said and what they continue to say they're going to do, which is greater flexibility over time," he said...

More generally, according to Adams, Snow will use the G7 meeting to press the US case for a realignment of global imbalances that have seen the US trade deficit bulge while China and other Asian nations build up huge surpluses.

All this seems to be happening even before economists have settled on exactly why demand is low in emerging Asia relative to savings. And don't forget that there is a corporate savings glut too; share buybacks in the second quarter rose 92 percent in the US compared with the same period last year.

Meanwhile, developed Asia hasn't been developing so well either. Hopefully, things may change for the better.

Land prices in Tokyo have risen for the first time since 1990, the government said Tuesday, bearing out ever-widening views of a pickup in the economy.

Average land prices in Tokyo's 23 wards as of July 1 increased 0.5 percent in residential districts and 0.6 percent in commercial areas over last year, marking the first rises since the burst of the bubble economy, according to the annual survey by the Land, Infrastructure and Transport Ministry.

On a national basis, the land ministry said average prices for both residential and commercial land were down for the 14th straight year but with signs the fall in rural areas is coming to a halt.

The margin of decline shrank in 29 prefectures for residential areas, up from 19 prefectures in the previous year. For commercial areas, the margin of decline shrank in 37 prefectures from 29 a year ago.

Japan over the past one and a half decade does provide a lesson on what could go wrong if policy-makers make the wrong decision.

1 comment:

ResponsibleActivist said...

I'm afraid it would be much worse in America! Japanese are well known for being fiscal conservatives, they usually do not buy items on credit, and most families have a cash savings. Americans on the other hand have astronomical debt; houses, automobiles, and the worst one CREDIT CARDS. When the devaluation of the dollar happens, there will be a lot more people going broke and losing everything they already dont own. God help us if I am right!

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