Misunderestimating or misoverestimating Asia's rise?
By Thomas P.M. Barnett
FINANCE AND ECONOMICS: "The balance of economic power: East or famine; Asia's economic weight in the world has rise, but by less than commonly assumed," The Economist, 27 February 2010. Link
The old argument about purchasing-power parity versus market exchange rates: the former puts Asia's share of global GDP at 35%, the latter at 27-28%. The mag's point: "the output of the rich West is still almost twice as big as that of the East." As for exports, Asia's share goes from 28% to 31% since 1995, and "remains smaller than western Europe's." The counterintuitive bit:
Indeed, the shift towards Asia appears to have slowed, not quickened.
How so? China's rise is offset by Japan's decline. Asia has a bigger share of global market capitalization (34%) than both Europe (27%) and America (33%), but the bulk of financial wealth remains in private hands--thus overwhelmingly in the West. China may have the world's biggest currency reserve, but official reserves account for only 5% of global financial assets. Asia's currencies likewise make up only 3% of total foreign-exchange reserves. Still, when the PPP measures are taken into account, Asia is super-sexy to business because three of the four largest consuming countries are found there: Japan, China and India. And that's with 3/5ths of the world's population currently consuming only 1/5th of the world's total. Add to that the undeniable reality that Asia leads the world in capital spending, and there's no ignoring the place. History has resumed from the combined disjuncture known as the Industrial Revolution and the age of colonialism: and Asia is back to where it once belonged. Key indicator: for most global corps, Asia is now about 20-25% of profits. By 2020, it could account for roughly half of most. |
