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Strategies & Market Trends : Asia Forum
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To: kormac who wrote (4563)6/15/1998 9:20:00 PM
From: Frodo Baxter  Read Replies (2) of 9980
 
Thanks for that. Let me just amplify a point.

"But the premise of Clinton's assertion is that a high growth rate denotes power. In fact, there is no necessary correlation between growth and health. Anyone willing to sell below cost will have a high growth rate, until he goes bankrupt. That is what happened to Japan. China's high growth rate does not mean that it has had profitable growth. Japan's problem, prefacing China's by about 8 years, was that it had magnificent growth, but the lowest rate of return on capital in the industrial world. The result was short term growth rates that were astronomical, followed by economic collapse."

Frankly, this is the essential reason why everything in Asia just plain stinks. How exactly did Japan become the second-largest economy within a generation of having itself flattened in a war? Answer: leverage. If you get into such hock, you can rejigger your debt, but it takes an inordinate amount of time to get back on track. One day it will happen. Just not soon.

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