Asian economies are now increasingly dependent on China, which is a dangerous trend, because China’s economy itself is slowing down. Originally those factors that are considered as beneficial to Asian economies, such as the rise in consumer spending and massive inflows of capital, now faces the possible fundamental reverse. Compared to what happened in 2008, the Asian economies are now entering a period of this recession with more internal risk.
ããThe rush that the Asian economies have to undergo do not merely come from the outside world, while the more and more serious dependence on internal demand may become the Achillesâ heel for the economy in Asia. Although consumers in Korea, China and other areas have been maintaining strong momentum, the trend has slowed, and real estate prices in China have begun to come down. At the time when the economies try to seek solutions from the global market, the trouble that the domestic market in Asia can not be neglected. It is also important for the Asia countries to try to seek more power from itself and learn to be more self-dependent.
ããLow interest rate environment and the influx of foreign investment in recent years also boosted the performance of Asian economies. At the same time, the current momentum of capital outflow has brought Asia to the test. Funding has currently left Asia as the European banks have reduced loans and investors pull out of Asian stocks and bonds. If the investors panic and there will be massive withdrawal of funds, Asia production may be paralyzed. People tend to underestimate the power of capital flow, while actually the outflow of capital is more devastating and more terrible than the volume reduction.
ããa large outflow of foreign capital caused the Indonesian rupiah to plunge and in order to support the rupiah exchange rate, Indonesia’s foreign exchange reserves in May dropped by nearly $ 5 billion, shrinking 5%. Four years ago India used to be one of the…