News

    Asia's Economic Strength at New High in 2006, Despite Jitters at Year's End 

    Despite a sudden plunge in stock prices in December, Asian economies, led by China and India, were among the most dynamic in the world - with many expanding by well over six percent in 2006.  As capital flowed into stock markets and exports climbed, many Asian stock markets hit record highs during the year.  However, economists and financiers say 2007 will see a modest slowdown in growth and market prices.  Claudia Blume reports from VOA's Asia News Center in Hong Kong.

    2006 was a boom year for Asian economies.  The Asian Development Bank projects seven-point-seven percent full-year growth for the developing countries in the region.

    The growth was strong enough that economists say the region will quickly shake off the effects of a sudden tumble in most stock markets on December 19.  New restrictions in Thailand on foreign investment sparked panic selling that sent the key Stock Exchange of Thailand index down nearly 15 percent.

    Other Asian markets sank more modestly on December 19, down one or two percent, and regained some of the lost ground in the next few days.

    For most of 2006, the economic focus was on Asia's two growing giants, India and China.  China's gross domestic product grew by more than 10 percent in 2006 and India expanded by more than eight percent.  Japan, the world's second largest economy, also gave the region a lift with its longest period of recovery since it fell into a slump more than a decade ago.

    Masahiro Kawai, an economist with the ADB in Manila, says strong global demand for Asian exports fueled the growth.

    "[This is] mainly because of the external market expansion on the part of the U.S," he said.  "The U.S. growth rate has been high, Europe, also Japan.  External environments have been quite good, and domestic demand has also expanded, you know investment [and] consumption, so generally speaking this, has been a very good year."

    Howard Gorges, vice chairman of South China Brokerage in Hong Kong, says the strong U.S. economy helped drive Asian stock markets to new heights.

    Even after the December 19 sell-off, the Hang Seng Index in Hong Kong was up more than 25 percent from a year earlier, and indices in both Mumbai and Jakarta gained more than 50 percent.  In the United States, the Dow Jones Industrial Average was up about 16 percent from a year ago.

    China's stock markets, which went nowhere for years, boomed in 2006; the Shanghai composite index doubled in value.  In large part, initial public share offerings by state-owned companies drove the market.  One listing alone - for China's biggest lender, the Industrial and Commercial Bank of China - raised a record $22 billion.

    Gorges says China has become very popular with foreign fund managers.

    "It's the persistent high growth rates, the strength of their foreign exchange reserves, the pressure on them to revalue their currency [that] has brought foreign money," he said.  "And indeed, the currency has revalued about five to six percent in the last year or so, and people expect further gradual evaluation.  So that's all helped."

    Even high oil prices did little to stop Asia's gains.  Strong exports cushioned the effects of rising energy costs, and tighter monetary policy in most capitals helped stall inflation.

    A decade ago, the region was feeling the first rumblings of what would become the Asian economic crisis.  By mid-1997, that was in full force: plunging currency values, unsustainable levels of foreign debt and soaring interest rates sank most of Asia into a severe recession.  Full recovery came only a few years ago.

    The ADB's Kawai says in general, Asian economies are far more resilient than they were a decade ago.

    "Many Asian countries have accumulated foreign exchange reserves, for example, and they have repaid external debt," he added.  "They have been working on banking system restructuring, on banking system reform.  They have been working on capital market development.  Regional financial cooperation has been strengthened and economic and financial vulnerabilities have been substantially reduced."

    Many economists think the region is likely to see growth cool slightly over the coming year, largely because an expected slowdown in the U.S. economy will cut demand for exports.  Also, China's efforts to rein in its economy are likely to trim regional growth.

    The ADB forecasts an average growth of seven-point-one percent for developing Asian economies in 2007.

    In addition, the credit rating agency Standard & Poor's notes that corporate earnings growth will probably slow and that central banks may tighten money supply or raise interest rates to prevent inflation.  That means that Asia's stock markets probably will not rise quite as much in 2007 as they did in 2006.

    Bank economist Kawai, however, warns that the region cannot continue to rely on export growth, and needs to expand domestic demand.

    One problem many Asian countries will face in 2007 is the same one that led the Thai government to restrict investment flows, currencies that are rising against the U.S. dollar.  A weaker dollar makes Asian exports more expensive on world markets.  The problem is made worse by the fact that China's currency is tightly controlled and has risen in value less than many other currencies, so Chinese goods are more competitive.

    The ADB's Kawai says China, in particular, needs to encourage households to spend more to fuel growth.  Other countries in Asia, Kawai says, need to continue making the economic and regulatory reforms that will encourage domestic and foreign investment.

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Press Freedom in Myanmar Fragile, Limitedi
    X
    Katie Arnold
    May 04, 2016 12:31 PM
    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Press Freedom in Myanmar Fragile, Limited

    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Taliban Threats Force Messi Fan to Leave Afghanistan

    A young Afghan boy, who recently received autographed shirts and a football from his soccer hero Lionel Messi, has fled his country due to safety concerns. He and his family are now taking refuge in neighboring Pakistan. VOA's Ayaz Gul reports from Islamabad.
    Video

    Video Major Rubbish Burning Experiment Captures Destructive Greenhouse Gases

    The world’s first test to capture environmentally harmful carbon dioxide gases from the fumes of burning rubbish took place recently in Oslo, Norway. The successful experiment at the city's main incinerator plant, showcased a method for capturing most of the carbon dioxide. VOA’s Deborah Block has more.
    Video

    Video EU Visa Block Threatens To Derail EU-Turkey Migrant Deal

    Turkish citizens could soon benefit from visa-free travel to Europe as part of the recent deal between the EU and Ankara to stem the flow of refugees. In return, Turkey has pledged to keep the migrants on Turkish soil and crack down on those who are smuggling them. Brussels is set to publish its latest progress report Wednesday — but as Henry Ridgwell reports from London, many EU lawmakers are threatening to veto the deal over human rights concerns.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Elephant Summit Results in $5M in Pledges, Presidential Support

    Attended and supported by three African presidents, a three-day anti-poaching summit has concluded in Kenya, resulting in $5 million in pledges and a united message to the world that elephants are worth more alive than dead. The summit culminated at the Nairobi National Park with the largest ivory burn in history. VOA’s Jill Craig attended the summit and has this report about the outcomes.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.
    Video

    Video Ethiopia’s Drought Takes Toll on Children

    Ethiopia is dealing with its worst drought in decades, thanks to El Nino weather patterns. An estimated 10 million people urgently need food aid. Six million of them are children, whose development may be compromised without sufficient help, Marthe van der Wolf reports for VOA from the Metahara district.
    Video

    Video Little Havana - a Slice of Cuban Culture in Florida

    Hispanic culture permeates everything in Miami’s Little Havana area: elderly men playing dominoes as they discuss politics, cigar rollers deep at work, or Cuban exiles talking with presidential candidates at a Cuban coffee window. With the recent rapprochement between Cuba and United States, one can only expect stronger ties between South Florida and Cuba.
    Video

    Video California Republicans Weigh Presidential Choices Amid Protests

    Republican presidential candidates have been wooing local party leaders in California, a state that could be decisive in selecting the party's nominee for U.S. president. VOA's Mike O’Sullivan reports delegates to the California party convention have been evaluating choices, while front-runner Donald Trump drew hundreds of raucous protesters Friday.
    Video

    Video ‘The Lights of Africa’ - Through the Eyes of 54 Artists

    An exhibition bringing together the work of 54 African artists, one from each country, is touring the continent after debuting at COP21 in Paris. Called "Lumières d'Afrique," the show centers on access to electricity and, more figuratively, ideas that enlighten. Emilie Iob reports from Abidjan, the exhibition's first stop.

    Special Report

    Adrift The Invisible African Diaspora