Can Asia ever decouple from the West?
There is some evidence to support this. The bank’s data show that the Asian recovery has been driven by the region’s own economic demand - there has been a rebound in intra-regional trade. The region is also less dependent on foreign capital than before. The impact of the European debt crisis has been minimal, with bond yields falling as capital continues to flow in.
Yet the region is still vulnerable to shocks from the West. Despite an increase in domestic demand, Asia depends heavily on exports. Most countries in the region continue to undervalue their currencies, making it difficult to move away from developed-world demand and toward domestic consumption. Stimulus spending has driven much of Asia’s blistering growth this year, but if America and Europe continue to face sluggish growth, no amount of fiscal or monetary pump-priming can prevent a slowdown.
My full post is here.