Are the Asian Emerging Economies Really Rebounding?

Since I posted two pieces, “Is East Asia Decoupling or Can It Decouple?” and “Rethinking the East Asian Development Model in the midst of the Global Recession” in May, quite a few articles in the major Western media outlets such as the Economist have recently argued that the economic rebound in emerging Asia including China, Korea, India, and Taiwan is underway, citing their upbeat GDP figures.

As I remarked in my recent posts, it is true that in the case of Korean economy, there are some positive signs of the economic recovery.

However, all in all, I am not sanguine about the Asian emerging economies’ domestic growth.

Given the intricate nature of the global economy, until their major trading partners’ economies show some symptoms of the real recovery and their structural weaknesses improve, it is too early to tell their economies have turned around. Like it or not, their economies have been tangled with the U.S. economy, and their positive numbers seem to be due, in large part, to governments’ simulus measures, although I don’t underestimate some corporations’ efforts to bounce back in the case of Korea.

There will be a correction in the U.S. stock market sooner or later, which will have impacts on other countries’ financial markets. (On a personal note, I lived a good amount of time in the U.S. and it is disheartening to see the U.S. sinking although it may take some time for something as big as the U.S. to tank in water.) In terms of economic data, in most parts of the globe, the unemployment rate and public/private debts are on the rise, and the personal income data are bleak. Further, business investments are down.

I’m afraid that a majority of ailing economies both in the East and the West are trading short-term gain for long-term pain. As painful as it may seem, it would be far better to start restoring the fundamentals now.