Can Asia Save The World’s Economy?

There is no question that Asian economies are currently growing at a very rapid pace. Countries like China, India, Russia, Japan, South Korea and Singapore are experiencing robust economic growth which will eventually translate into more important global power. However, that is years, if not decades, away and it is nothing for the West to fear. According to the the latest figures from the United Nations, there are more than 4 billion people (approximately 60% of the entire global population), living in 46 different countries in Asia. In recent decades, Asia has accumulated over $4 trillion of foreign exchange reserves which is more than half of the world’s total and has become the largest holder of US debt.  These factors have helped Asia become a formidable force in the geopolitical arena.

Economic Power

According to the IMF, the largest economies in Asia in terms of nominal gross domestic product (GDP) are: Japan, China, India, Russia and South Korea. The vast majority of wealth (measured by GDP per capita) resides mostly in Japan and South Korea, as well as the oil rich countries of the Middle East such as Saudi Arabia, Qatar, and the United Arab Emirates.

Explosive Growth

Most Asian economies are experiencing explosive economic growth.  As a result, they are enjoying massive amounts of wealth which is a natural function of the robust growth. As the entire continent continues to develop, and becomes more affluent in the process, their wants and needs change. Currently, Asian consumers are beginning to demand better goods & services which is going to continue as long as they continue to develop and this only helps the global recovery. It is also important to remain cognizant of the fact that China and India are among the the fastest growing economies in the world and both have more than 1 billion citizens. Simple math tells us that if only 30% of their population become more affluent over the next few years that translates into explosive demand because that eclipses the entire population of the United States!

How Big Is The Global Economy?

According to the IMF, in 2008, the entire global nominal GDP stood at approximately $61 Trillion. The U.S., the world’s largest economy, was approximately $14.4 trillion in ’08. Japan, the second largest economy, stood at $4.9 trillion and China, the third largest, was $4.3 trillion. These numbers show that even if China and Japan continue to grow at 8-12% a year (which is is not the case for Japan) it will take decades before China reaches the size of the U.S. Is it healthy for nations to grow and prosper? Of course, because the developed world was built on growth and prosperity for all.
Click here for a complete list of countries GDP: http://bit.ly/rhu12).

How To Capitalize on Asia’s Growth?

I am frequently asked by the media and various people at conferences and meetings: How can someone capitalize on Asia’s growth? My answer is simple: Invest there. This doesn’t mean that you have to leave your “day job,” pack up and move your family to Hong Kong. Start by looking at what publicly traded companies sport strong fundamental and technical strength and reside in the region. Look at which ETF’s work for you and your investment approach. Educate yourself. Then, if suitable for your investment objectives, you can slowly incorporate a healthy strategy into your investment process (If you are interested in more information on this subject- send us an inquiry on our contact page).

Conclusion

Right now the world is in nascent stages of a massive economic recovery and the worst is behind us (barring some unforeseen event). There is no question that Asia is playing a pivotal role in that process. As of this writing, U.S. President Barack Obama is in Asia visiting with several heads of state to maintain a healthy relationship with the East. Will economic growth disappear from the West? Not anytime soon, but it is safe to say that over the next few decades Asia will continue to strengthen and eventually emerge as a formidable force on the international arena. Currently, Asian governments are quietly buying up massive amounts of natural resources  and other valuable assets. It is in their interest to do so because the one formidable threat that could cripple Asian prosperity is the dearth of natural resources that is needed to maintain their robust growth. If this continues (and we see no reason why it won’t), one day the Western world will “wake up” and ask themselves how did Asia become too big to fail and how did this happen?