Four Reasons to Doubt "Decoupling"

Are the developing economies of Asia becoming "decoupled" from the developed world?  Right now those economies are rebounding rapidly, while the West continues to stumble.  The Far Eastern Economic Review has four reasons to be skeptical about any talk of decoupling.

While structural changes, which most likely will be further accelerated through the current crisis, have been underway in the world economy long before the outbreak of the global economic crisis, it might be too early to declare a decoupling of Asian emerging markets (or those in any other region) from the West, for several reasons.

First of all, one should note that while virtually all Asian economies have been hit by the financial crisis, the damages, at least in their financial sectors, have been much less severe than in Europe or the U.S., which makes recovery of their real economies easier and more rapid. . . .

Second, while the world economy has stabilized over recent months and we are no longer operating in an environment of complete uncertainty, it is far too early to declare an end to the crisis—in Asia or elsewhere. . . . .

Third, most Asian governments were able to quickly implement fiscal-stimulus packages to stabilize their economies. In this regard, China’s state-ownership of the banking system proved to be an asset as it allowed the government to promptly spur investment and economic activity. . . .

Fourth, China, like the other emerging East Asian economies, remains tied to the U.S. economy through the dollar. . . .

The full article is here.

Technorati Tags: economy