Asian economic growth is moving rapidly ahead. The economies of China, Japan and South Korea currently account for about 25 percent of world output. In the fourth quarter of last year alone, they grew at annual rates of 7.7 percent, 2.7 percent and 4 percent, respectively.
Japan
Of the three, Japan is growing at a slower pace and taking a more balanced stride in its economic activity. 69 percent of Japan’s fourth quarter growth was attributed to domestic demand, a welcome change from the typical export-led growth, which had kept the third-largest economy in the world living off the rest of the world during most of its impressive post-war economic development.
The latest Japanese numbers indicate that the country’s expansionary monetary policy has stimulated household consumption and residential investment , two fundamental growth factors representing nearly two-thirds of the economy.
The double-digit growth in residential investments is especially reassuring to those young men and women who continue to live with their parents because they cannot afford a house of their own and have postponed marrying and starting a family. Tokyo seems to have taken exactly the right fiscal steps this time around.
The Japanese economy also got an extra boost from unanticipated buying as consumers rushed to beat higher sales taxes next April.
South Korea
South Korea seems to be adjusting well to shifting market forces while striving to compete in the most lucrative and technologically advanced segments of global industry. Structural changes are being implemented in order to pacify the large conglomerates and to lessen their control of the national economy.
These changes and their impact on the organization of labor and product markets will take time so these multinationals will remain the mainstay of the country’s economy for the foreseeable future. In the meantime, a strong government initiative is in place which should stimulate the creation of small and medium-sized companies. Seoul expects the generated competition will lead technological innovation and will raise the potential growth rate of the "knowledge economy" to 4 percent.
In addition, President Park’s moves for softening relations with North Korea offers equally promising political and economic prospects. During a cabinet meeting last week, Park broadcast the development of a special committee to work on "systematic and constructive" steps toward the Korean unification. She followed up by calling on the North to continue with more frequent family reunions.
China
China's gradual transition toward an actively managed social market economy must overcome some huge trials of reformation. China's 7 percent growth is not in doubt but in order to make the switch, Beijing must solve the questions of how to encourage state-owned enterprises to perform like competitive firms in a market economy and how to make a fundamental reform of the Chinese financial system. In addition, the problem of converting the yuan continues to be a challenge.
If properly managed, these reforms can be achieved under conditions of sustained economic activity. This is possible because China's maintains a tremendous amount of savings which can fund a high degree of output and employment while the country continues to build social welfare programs, better education, additional infrastructure and a cleaner environment.
It is safe to conclude that the strong growth dynamics driving these three Asian economies should be of no particular concern to investors, despite the worries about peace and cooperation in the part of the world.