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Financial Sector

Regional roundup: Finance in East Asia – Feb. 11

James Seward's picture

Well, the bad news continues across the East Asia and Pacific region. The Financial Times just ran a long article on the "speed and ferocity of the region's economic downturn." The piece highlighted that the fast downturn was a result of Asia's over-reliance on export-led growth over the past decade. This follows the IMF's slashed growth forecasts for the large East Asian economies. It projected only 5.5 percent growth across developing Asia for 2009, which sounds great for most economies these days, but it is way off of the 7.8 percent posted last year.

The IMF is expecting only 6.7 percent growth in China, which is 1.8 percent less than what they forecast only in October. This contrasts sharply with the view of the World Bank's Chief Economist, Justin Lin, who just two weeks ago said he thought China could achieve the target rate of growth – 8 percent – this year because of fiscal stimulus spending.

Some optimism during gloomy mood of Davos 2009

James I Davison's picture

Chinese Premier Wen Jiabao as optimistically predicted his country’s growth in 2009. Image credit: worldeconomicforum at Flickr under a Creative Commons license.
I've seen quite a few stories this week about the World Economic Forum, which is entering its last two days in Davos, Switzerland. Not surprisingly, accounts coming out of the annual meeting have reflected the gloomy state of a global economy in the midst of financial crisis. Seems the event's past reputation of being a party for wealthy people and celebrities has been replaced with politicians, average government workers and others discussing – as the 2009 event has been dubbed – "Shaping the Post-Crisis World."

A story that stuck out at me came from the New York Times, which quoted Wen Jiabao, the Chinese premier, as optimistically predicting the country’s growth in 2009 at 8 percent. That’s pretty optimistic compared to many other economist predictions – some as low as 4 percent or less for the year.

Regional roundup: Finance in East Asia – Jan. 23

James Seward's picture

I’m beginning to sound like a broken record, but the bad news keeps coming on the economies in the region.  As the Financial Times just put it, “The Asian Financial Crisis Deepens.”  Thus far, the deteriorating economic performance has not appeared to flow through to the financial sector, but it now seems that the banks across the region can not avo

Regional roundup: Finance in East Asia – Jan. 16

James Seward's picture

Unfortunately, we start this roundup as we did the last – with more economic bad news. Exports dropped 2.8 percent and imports declined 21 percent in China on annualized basis in December. Also, China reported the first slowdown in growth of its foreign reserves since 1998, although reserves still rose by $45 billion in the fourth quarter of last year to about $1.95 trillion. Debate is also now swirling about rate of China’s economic growth for 2009, and even the central bank governor now is publicly setting expectations that the target rate of 8 percent may not be achievable.

Regional roundup: Finance in East Asia

James Seward's picture

This is the first blog entry of what I hope to be regular updates from the financial sector and related areas across the East Asia and Pacific region. So, let’s see how the New Year began in Asia.

Unfortunately, the bad news keeps coming on the economies in the region in terms of exports and industrial output. Exports and industrial production fell 6.2 percent in Malaysia in November and exports from Thailand fell 18 percent in November. Surveys of consumer confidence, business sentiment, and manufacturers across the region have all shown significant declines.

East Asian governments take action in time of financial crisis

James Seward's picture

In my last post, I discussed how emerging Asia is getting hit by the financial storm and the early signs of stress in the financial systems across the region. The intensity of this storm appears to be getting worse, but governments across East Asia are taking a wide range of measures to bolster their financial systems.

Sustaining growth: China’s need for a new growth model

David Dollar's picture

China’s big stimulus plan will help keep the economy growing at a healthy rate, though 2009 will be a rough year with probably the slowest growth in nearly 20 years. While China applies stimulus to deal with the immediate downturn, it would be good to be thinking ahead. China needs a new growth model, and it should evaluate its possible spending plans both in terms of immediate stimulus and in terms of contribution to this new growth model.

China needs a new growth model because after the global downturn comes to an end, exports will never again play the same role as they have in the past two decades. I would argue that the four basic principles that account for the Chinese miracle since 1978 remain valid, each of which needs some tweaking in the new environment.

In time of economic crisis, influential thinkers contemplate future

David Dollar's picture

The World Economic Forum, billed as the largest-ever brainstorming on the global agenda, drew about 700 people to Dubai in early November. Image credit: worldeconomicforum at Flickr under a Creative Commons license.
Seven hundred self-styled “smart people” got together in Dubai on Nov. 7-9 under the auspices of the World Economic Forum for what was billed as the largest-ever brainstorming on the global agenda -- that is, the priorities for global action. The event had been planned for a long time, but the deepening global financial and economic crisis naturally colored the discussions. I was part of the trade facilitation group -- under Harvard professor Robert Lawrence -- which worked closely with the trade policy group under Ernesto Zedillo, director of Yale University’s Center for the Study of Globalization. The most fun was the unstructured morning in which we could interact as we chose with any of the 66 other groups. I spent time with the groups working on the future of China, climate change, and growth and development. The official summary is on the WEF website, but I took away three main points from the interesting weekend.

It is striking how well the global trade system is working, even as the global financial system spirals into crisis. This is not to say that global trade is immune from the crisis, far from it. Trade finance has contracted sharply and the World Bank projects that total global trade in 2009 will decline for the first time since 1982. But what is striking is that global trade has a well-defined set of rules and an institution (the World Trade Organization) to oversee them. Global finance, on the other hand, does not have a well-defined set of rules and regulations. Until now, the system of global trade continued to work well.

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