The Asian economies were the rescue ship for the global economy in 2009 and the starting point from where the world tried to overcome the global financial crisis, the worst since the Great Depression. Now after the Asian region fulfilled its role gracefully in 2009, everyone awaits to see the next step for this region, and whether we will see a change in the global economic map in 2010. The global financial crisis was able to dent demand through the end of 2008 and early 2009, due to credit difficulties that determined global banks to hoard what was left from their liquidity and refrain from giving loans. This had a negative affect on world trade, since companies lacked the ability to access money, obliging many to start reducing their productivity and investments. 

On the other hand, the recession in which many world economies fell victim to, determined them to reduce demand on various exports. Thereby, corporate profits started falling considerably while banks started to fear many companies inability to cover their loans, just like what happened with the giant car manufacturer GM, which ultimately went bankrupt. 

Here came the role that the Asian economies played in supporting the entire globe, starting with China which adopted a stimulus package worth 4 trillion yuan during November2008, but the actual impact of the stimulus plan did not show until the end of the first quarter of 2009. The Chinese government directed the plan to households and several infrastructure projects aimed to provide many jobs. 

China also facilitated lending regulations and eased the restrictions imposed on banks encouraging them to give more loans in order to help the Chinese companies survive, since global demand on the Chinese goods fell considerably. The Chinese Premier Wen Jiabao said his country will continue to stimulate consumers’ spending in 2010 and which is supposed to significantly support growth in China. Yet he noted that the Chinese economy may face many challenges during 2010. 

The Chinese government intends in 2010 to keep its support for the Chinese families living in rural areas when purchasing electrical appliances and vehicles since the government intend to refrain from adding taxes on cars. However, the Chinese monetary policy makers intend in 2010 to limit lending to 7 or 8 trillion yuan since officials fear the risks of an increase in bad loans which could threaten forming a new asset bubble. 

The Chinese economy stimulus was met with considerable success, since the nation grew during the third quarter by 8.9%, more than the government expected by 8.0%. With this gradual growth seen by the Chinese economy global demand on raw materials and commodities started to improve, helping economies like Australia and New Zealand who depend on such exports to start recovering. 

The Chinese economy in 2010 is expected to continue to grow gradually, yet this may be accompanied with some deflationary risks because of the decline seen in commodities prices, especially when comparing commodities to levels reached during in 2008. But the government is not concerned about this issue at the moment since it realizes it can be contained over the near future. 

The real problem that the Chinese economy may face in 2010 and which is expected to be the main challenge for the third largest economy in the world will be the inflation in asset prices and the increased in liquidity within the financial system. The facilities the government imposed in the banking sector, investors from all over the world showed interest in the Chinese real estate, causing a considerable rise in prices, threatening to form a new economic bubble. 

The G20 assured during their meeting in 2009 on the need for liberalization of the yuan’s exchange rate in order to give opportunity for global exports to recover, which will support various economies around the world to overcome the worst financial crisis since the Great Depression. The rise in the yuan will reduce some of the dominance which Chinese exports enjoy.  

Global economies, mainly the United States, increased pressure on the Chinese government to take such an action in order to ease some of the pressure the dollar faces. If such a decision will be taken in 2010 by the Chinese government, the global financial map will be changed, and we might see China in the center of financial markets, in addition to the substantial changes we will see in the dollar and other majors’ exchange rates. 

For Japan the situation was different, since the economy was affected deeply by the global financial crisis, determining Japan's central bank to implement quantitative easing policies since the beginning of 2009 in order to provide enough liquidity which could help the economy to start functioning again. Japan benefited immensely from the recovery that has occurred in the Chinese economy, helping it to overcome the recession in which the country fell in the first quarter of 2009. 

Japan’s future will depend primarily on the central bank and government’s ability to achieve the balance between supporting growth rates gradually and stabilize price levels, since the second largest economy in the world faces increased deflationary risk since the third quarter of 2009. 

One of the main reasons behind the increase in deflationary risks is the decline in crude oil and commodity prices compared with last year, determining the annual consumer price index which excludes fresh food, which is considered by the central bank to be the main inflation measure, to continue falling. 

The Japanese yen’s appreciation against the dollar, which reached to its highest in 14 years at 84.79 in November, represented major problems for the economy in 2009. The high value of the currency weakened demand on the Japanese goods which became less competitive in international markets. 

This was the main reason behind Japan’s central bank and the government interference in financial markets pumping more money in order to weaken the yen. In 2010 we might start seeing the impact of those actions, where the yen might start to weaken and demand on the Japanese export might start to improve. 

Australia also benefited strongly from the recovery seen by the Chinese economy, since China is Australia’s main trade partner; in addition to the stimulus plans worth 90 billion Australian dollars and the cut in interest rates to the lowest in 49 years to 3.00%, helped Australia avoid falling into recession in 2009. 

Australia’s economic performance continued to improve gradually during the second and the third quarters. In the fourth quarter, Australia's central bank began raising raise interest rates to reach to 3.75% in December 2009, assuring the economy is walking in the right path and that growth is going to rise gradually.  

The Australian central bank sees its economy to continue growing gradually and steadily in 2010 with the possibility of additional raises in the interest rates. As for the problems that the economy might face over the medium and long terms will be generated from the labor sector, yet the central bank said that if growth stabilizes, then companies’ profits will strengthen, and then the problems faced by the labor sector will start to shrink.  

Dear reader, after reviewing the most important economic events expected in the Asian region in 2010, let’s see some key economic forecasts to major indicators for the Asian countries during 2010 and 2011. 

Japan: 

 
China: 

Australia: 

Asia Interest Rate (%): 

Asia GDP (%): 

The Asian economies were the rescue ship for the global economy in 2009 and the starting point from which world tried to overcome the global financial crisis, the worst since the Great Depression. Now after the Asian region fulfilled its role gracefully in 2009, everyone awaits to see the next step for this region…

ecpulse.com