(Source: Top foreign stock, 2011)
About ten years ago, it is not too long ago that IMF has been very spiteful on Asian financial crisis in July 1997. In 2011, IMF is so affable that majority of Asian slightly start forgetting about Asian financial crisis. Yet, Asian countries do not really welcome this friendly gesture taking their painful lesion from financial crisis (1997) into account. When you generally talk about China, what is the first thing that comes to your mind? Is it the largest population, cheap labor or the next leader of global economy? If we look at closely at ‘Export growth by trade partner in 2010’, this graph illustrates an important view that economic growth of majority of Asian countries are based on the exports, mainly to China, except Philippine and it was also interesting to see exports to the United States was less than China in comparison amongst trade partners as shown below.
We often read the articles with the title such as China: stunning growth? ‘Is China in recession ‘ Large part of Chinese economic growth was obtained by the export activity, in which this different level of exports can be monitored by the index, called ‘Baltic Exchange Dry Index (BDI, in short). This index tracks worldwide international shipping prices of various dry bulk cargoes and provide an assessment of the price of moving the major raw materials by sea. When this index goes up, this would mean that there is high demand of moving raw materials from one country to another. In opposite, this show the falling demand of raw materials (or commodity) the line graph above, please refer to blue line. Second half of Year 2008, the rate dropped from $11380/day down to almost $ 330/day (approx.) shown below.
(Source: Investmenttool.com, 2010)
In my own perspective, Asian countries might be exposed to ‘knock-on effect’ risk if China reaches the point where economy can’t grow further growing then. Then, what could be the driving force of stunning Asian economic growth that we have been hearing and seen so far? It is certain that Asian economies will grow in certain size. Sustainability of the growth still is questionable. So, the illusion of China – is it still there? I think not. BDI has temporarily been raising right after the financial crisis 2007. This was because China had a substantial impact on rising demand of moving raw materials, most commonly iron ore from other countries to China (inbound transport) There was also a huge of wave of constructing new apartments, real estate buildings in China which even pushed demand even higher. This means that China has been importing raw materials rather than getting this within their country.
Again, if they stop importing, where will the rest of demand come from? Is it sufficient enough to grasp well-balanced global trade? Does China need continuously have their economic growth with bubble in their economy to maintain current positivism? Huge cheering from trade partners, IMF, World Bank – who are they in favor of? I personally don’t think that cheering gesture of IMF towards Asian countries is sometimes in favor of 99% of global economy. I suppose it is mostly for 1 % for advanced economies without truly knowing what these countries are after and perhaps they still conduct such impulsive behavior after being saved from this crisis. All economies (countries) should really have the mindset of fostering their economy, not heavily relying on a particular country (e.g. China). Independence; that is something that we all have been lacked for some time.
Image 1 – US Economic Crisis Climate
Image 2 – Baltic Dry Index
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