Desperately Seeking Consumers for Oriental Products
In Europe and North America, the East Asia economies have long been envied and hated, either extolled as economic models or accused of every economic wrongdoing. On the one hand, these countries grew very fast, were producing quality goods at reasonable costs, had large savings they were ready to invest in international capital markets, and had balanced budgets. On the other hand, they were blamed for destroying our jobs and pushing up prices of raw materials, oil especially, to record levels, for stealing foreign markets conquered with strenuous efforts over decades if not centuries, and for seizing our family jewels (think Jaguar or Manchester City) with our own money. Then the crisis came, adding spite to injury: the only hope of getting out of the slump rapidly was in their hands; world growth would be determined by China and India's dynamism and by other countries in the region; our companies had to be sold at fire-sale prices to avoid bankruptcy.
The situation is actually different. Asian economies have grown producing goods that were mostly bought by Western consumers: for many of them, their first and second export markets are the US and the EU (or the other way around); over the last quarter of 2008, aggregate income actually decreased (rather than its rate of growth simply slowing down) following a drastic drop in exports. Over the last two decades, exports had commanded an ever larger share of aggregate income, while household consumption decreased its weight on the whole. Even if this might seem paradoxical, the drop in exports has not always worsened the trade balance, calculated as the the difference between the value of exports and the value of imports. In many cases imports also decreased, both of consumption goods and especially intermediate goods. Due to outsourcing and offshoring, many imported goods are embodied in goods to be sold abroad: think about TV screens or PC notebooks, which are assemble pieces manufactured in several countries.
For Asia, growing is not a luxury, but a necessity: poverty has gone down but has not disappeared. Even more important is the change in expectations: growing strata of the population have become accustomed to living standards beyond subsistence, and now expect from their governments a constantly rising level of welfare. People no longer have patience for lean years. It is often said that China's GDP must grow by at least 7%, in order to avoid major social disorders.
The economic policies put in place to face the crisis are varied and change from country to country, but they all share two key components: sustaining consumer spending by households and investing in infrastructure. While the latter has a positive medium-term effect on productivity and thereby on production costs, the former is an attempt to substitute internal consumption for the export sector as an engine of growth. American consumers have started to save, and it's likely they won't buy the same amount of Asian goods, even after the crisis is over. Prosperous consumers are thus desperately sought by Asian producers...