As the United States and Western Europe beam about our glacial recoveries ("Look everybody, 0.1 percent annualized negative growth last quarter!"), Asia must be pointing and laughing a good, boastful laugh. Six months after the nadir of this global near-depression, Asia is dominating, again. As the old G7 risks contracting 3 percent this year, Asia could grow by 5 percent. China, Indonesia, South Korea and Singapore grew by an average annualized rate of 10 percent last quarter. Even Japan, where first-quarter GDP fell at a worlds-worst annualized rate of 11.7 percent, recently recorded positive growth in the second quarter.
1) Huge government stimulus
Japan, having learned its lesson from the Lost Decade to counter recessions with speed and vigor, unleashed a stimulus that amounted to 5 percent of GDP, about the same as the US. China's stimulus (more than 12 percent of GDP, by some reports) has been spent much faster than ours.
2) Low debt
One reason many American economists are worried that our stimulus won't juice consumer spending is that American need the money to get out of debt, not to buy new clothes and furniture. But many Asian countries are famous savers. The continent is swimming in liquidity and some are wondering whether countries like China will recalibrate their economy to make consumption a much larger part of their their economy.
3) Healthier banks
This is a simple one: Many Asian banks were not nearly as tainted by the mortgage-backed securities and credit default swaps that took Western investment banks, hedge funds and insurance companies. When the world economy fell, they fell too, but onto a higher floor.
4) Manufacturing's comeback
During a recession, many Asian-based products like electronics are the first to go. But as the world economy gets back on track, consumers are returning to their techie wish lists and Asian manufacturing is clicking again.