Wednesday, April 22, 2009

US demand (Kauppapolitiikka)

Latest from Dr. Dan Steinbock, ICA Institute Research Director of International Business:

In his new brief for Kauppapolitiikka, the prestigious bi-monthly of Finland's Ministry of Foreign Affairs, Dr Steinbock argues that "U.S. demand has collapsed, but not disappeared." True, American consumer is now anxious, indebted, and exhausted. Among the G7 nations, however, U.S. consumption is better positioned to thrive over time. In fact, he argues that "those who argue that export-led growth has disappeared or that the U.S. demand is now gone assume – mistakenly – that a recovery is identical with the death of the patient." Not only will U.S. population grow faster and be more populous over time. The nation will be more diverse racially and ethnically by mid-century. Certainly, it will be older as well, but – as long as the inflow of immigration will continue – graying demographics will not cause the kind of dislocations that are almost inevitable in Japan, Germany and Italy.

India's election (Talouselama)

Latest from Dr. Dan Steinbock, ICA Institute Research Director of International Business:

Dr Steinbock is a regular contributor toTalouselama, Finland's leading national business weekly. In his new brief on India's election (Talouselama, Apr 10, 2009), he analyzes the new economic, political and security landscape in India. Amidst the ongoing global financial crisis, India's economy is experiencing a difficult decline, while security threats are increasing. India's government has already launched three stimulus packages of an estimated 85 billion dollar. Interest rates have been cut down to 5.0 percent. The month-long election process will begin in mid-April. "It is overshadowed by the concern for security, political divisions and economic threats," notes Dr Steinbock. "The next coalition government will be internally divisive. Still, it should steer the Indian economy out from the stormy waters. It is a difficult task." For now, India's National Congress Party is leading the election surveys, but the conservative Bharatiya Janata Party is not too far behind. Further, the "Third Front," with its communists and populists, will contribute to the national debate. After the terror attacks in Mumbai, uneasiness is rising. "Since September 11, 2001, Washington has balanced between New Delhi and Islamabad," writes Dr Steinbock. "In the coming months, this balancing act will be tested."

Export-led growth, regional integration (China Daily)

Latest from Dan Steinbock, ICA Institute Research Director of International Business:

Dr Steinbock is a contributor to China Daily, China's leading English-language daily. In his new commentary, "Integration to take over export-led growth" (China Daily, April 15, 2009), he argues that Americans are no longer overconsuming but saving eight times more than only a few years ago. As a result, East Asia's export-led growth model has collapsed. The contraction of exports, as severe as it has been, does not mean the end of exports. "Take for instance the collapse of car sales in America," he argues. "If the current replacement ratio truly prevails, a typical car would have to last some 27 years. Such a ratio is simply not sustainable."
Despite the turmoil of Thailand, China-ASEAN cooperation is now moving to a new phase. Demonstrating leadership, China will establish a $10 billion China-ASEAN investment cooperation fund for infrastructure construction, energy production, information technology and communications. China also plans to offer $15 billion in credit to ASEAN countries during the next three to five years. "The longer-term challenge for Asia's export-heavy economies is to reduce dependence on wealthier consumers in the West," argues Dr Steinbock. "Surmounting legacies of colonialism and historical division, many Asian nations are now developing bilateral and multilateral free trade agreements. Regional integration is one way to achieve that objective and to compensate for decreases in external demand."

Rising cities helping to rebalance growth

Latest from Dr. Dan Steinbock, ICA Institute's Research Director of International Business:

In his new commentary, "Rising cities helping to rebalance growth" (China Daily, April 7, 2009), Dr Steinbock notes that in the past few months, international media has made much about the collapse of exports from Asia, including China. However, conventional wisdom is flawed on two critical counts. With recovery, trade and investment will take off, over time. But China's growth does not depend on exports alone. "Given the stable and peaceful international environment", argues Dr Steinbock, "China's massive and evolving market will offer extraordinary growth potential for years to come - as evidenced by sustained urbanization."

In 2010 China's level of urbanization will be about the same as that of the US in 1910 and Japan in the late 1950s, notes Dr Steinbock. "In the US, that benchmark year heralded America's economic dominance in the world economy. In Japan, the benchmark year heralded beginning of the Golden Era of the Japanese economy in the 1980s." He adds: "In 2010, China may be where urban America was in the early 1910s and urban Japan in the late 1950s - at the eve of a great growth curve."
China Daily, established in 1981, is the only national English-language newspaper in China. The average daily circulation is more than 200,000, one-third of which is abroad in more than 150 countries and regions.