By: Richard King
It is that time of the year, when we unveil our outlook for the coming year, 2009. As an introduction, let me share with you how I began my Pacific Rim outlook for 2008, which was published in Business Life.
“The outlook for the Pacific Rim for 2008 and beyond continues to overshadow the rest of the world and strengthens its role as the main engine of the world economy. China and Japan will lead the economic growth of Asia in 2008, with China continuing extraordinary economic growth and possibly passing Japan within five years as Asia’s second largest economy.
During 2007, the Pacific Rim economies continued their impressive growth with the gross domestic product expanding by 7.5%. I believe the region will show a 7% growth for the next few years, due to continual strong consumer demand, growing inter-regional trade and the growing appetite for Asian products by the U.S and Europe. The best performers will be Mainland China, Hong King, Taiwan, India, Malaysia, Singapore and Vietnam.
With respect to the California economy, Pacific Rim trade and investment is responsible for about 25% of our economy, and California companies’ investment in the Pacific Rim creates more than a million jobs. Furthermore, our communications with the Pacific Rim through our Universities and foreign subsidiaries located here are unique. I expect that these trade, investment and cultural trends will continue to expand in 2008 and beyond.”
At that time, I had no idea that we would be experiencing the challenges that we now face: The deterioration of our financial sector; a string of government bailouts; a collapse of the housing market; the credit crunch and an historical election, with the first African American becoming president of the United States.
Even with these unforeseen developments, as I look at the Pacific Rim in 2009, I see the trends for 2008 continuing for 2009.
Let’s take a look at the trends in some of these countries.
First, Japan. Up until the mid 90’s, Japan was setting the pace for the rest of the world in terms of economic growth, investment and world trade. Then, the real estate and financial bubble burst and it was back to economic reality for the Japanese. To invigorate the economy, the Japanese government has been emphasizing economic reform, deregulation, banking reform and increased consumer spending. The full impact of these measures is still to be felt and, consequently, Japanese GDP growth has been slow, leveling off at 1-2% annually. As we look ahead for the next few years, Japan will continue slow growth and be increasingly dependent on the China market. The Japanese economy is likely to continue moving sideways in 2009 because of the sluggish exports caused by a slowdown in the U.S. economy. Also, it will be interesting to see if the new Prime Minister, Taro Aso can provide the political and economic stability necessary for Japan’s continued growth.
China’s growth will continue with an economy growing at 8 to 9%. Their role as manufacturing center of the world and their increased globalization of the economy will continue to position China as an economic power in the Pacific Rim. The economic reforms, political stability, decentralization, increased privatization and the growing affluence of the China consumer will continue to be a factor in their economic growth. However, the continued growth also brings challenge to China which cannot afford to overheat its economy. The Chinese government is very aware of this situation and will begin to curtail growth in 2009. China has also just announced a $560 billion dollar stimulus to invigorate its economy.
Closely related to China is Hong Kong, which has emerged from a depression due to the devaluation in property values. Hong Kong will increasingly provide value added services to China exports, and be a communication and transportation link to the rest of Asia. Meanwhile, with increased property values, political stability and entrepot trade, Hong Kong will show continual growth through 2009 with a 4-5% GDP.
Finally, the ASEAN nations: This group of 10 South East Asian nations is showing increased economic viability led by Singapore and Malaysia with Indonesia showing increased vitality. While once regarded as a political block of nations, ASEAN’s moving toward being an economic entity like an embryonic European Union. We can look forward to increased industrialization and information technology development and less dependency on agrarian enterprise. These countries will average a 3% GDP growth for the next few years.
The Pacific Rim economies will continue to out perform the rest of the world but at a slower pace. They will be in a better position to weather the financial storm due to the significant foreign reserves and their role as a dominate trading partner with Asia and the United States. California firms will continue to have trade and investment opportunities in the Pacific Rim in 2009, but in a more competitive environment.
Chairman Emeritus /Trustee, Woodbury University
Chairman/Founder King International Group
Chairman, Go Green Solutions