The Asian Countries Looking Inward

The Asians economies have heavily depended on its export to the Western countries. Realizing the external demand is dwindling, they are facing the reality and making their moves accordingly.

The Japanese prime minister, Yukio Hatoyama proposed the formation of an East Asian community, an EU-style block to the Chinese president, Hu Jintao on the sidelines of the UN General Assembly last month.

The Korean president, Lee Myung-bak expressed support for the idea of forming the regional bloc pitched by the Japanese prime minister at a summit between the two leaders. They are entertaining the idea of establishing an Asian common currency (after all, they are in a dollar trap) and permanent regional security.

Meanwhile, at the recent Korea-ASEAN summit, the Korean president and leaders of the 10-member Association of Southeast Asian Nations have agreed to work more closely for economic cooperation: for example, establishing the emergency fund to be used in case of capital emergency through currency swap arrangements. They discussed other measures to deal with food supply in the region as well.

The Asian countries have got the message re: their export-led model wouldn’t work in the way they used to. Consequently, they have diversified away from the U.S. They are looking at each other as a customer, of course. While trying to boost domestic consumption, most of export-dependent Asian economies need buyers outside their own country to sustain employment and growth for the time being.

They seem to be also trying not to be shaken by the Wall Street wise guys. For instance, the Chinese government has declared that its institutions won’t be disadvantaged by financial products sold to them by Wall Street under false pretenses.

Amid the current downturn, yes, they have problems of their own such as unemployment and demographic concerns, risks (e.g., quantitative easing and stock market and property bubbles), and geopolitical issues.

And yet, they have maintained a manufacturing-driven economy, not financial engineering-driven one, and have their way of dealing with corporatism, people, savings and momentum.

Interesting times, indeed.