Downturn accelerates shift in influence to Asia

08:59, April 01, 2010      

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The shift in the center of global economic gravity to Asia has been accelerated by the global economic downturn, with China playing a more and more significant role, Sunil Chopra, interim dean of Kellogg School of Management at Northwestern University, told China Daily in an exclusive interview.

"I think the shift has been in place, if you think about it, for 10 plus years. And in my opinion, it has been accelerated in the downturn," he said.

The acceleration is a direct result of the deepening contrast between the vigorousness of economies in the East and the weakness of Western economies.

"This tends to happen during the downturn. If you look at business at large, during the boom time, the relative position doesn't change much. But during the downturn, it changes a lot," Chopra said.

Most of the developed world including the United States and Western Europe has taken a big hit during the past recession and is still struggling. Whereas in Asia, fears about overheating and asset bubbles have prevailed in many economies including China, India and Singapore.

Chopra said that right now Asia is the only region that creates new jobs.

The huge unmet internal demand in the region is playing a key role in the shift of the center of global economic gravity to Asia from the West, he said.

"I think there are many factors behind the shift. But the most important one is the huge unmet internal demand," he said.

For example, China has been relying heavily on exports for growth and is now increasingly shifting to internal demand for new growth.

Being the most populous country in the world and having the reputation as the world's factory, China has been playing a very significant role in the process that sees the shift of global economic gravity to the East.

"China has been significant in this process in many different ways," the Kellogg dean said.

"First of all, China was very significant through its exports. Through its exports, China has actually helped bring down inflation in a variety of countries," he said.

Consumer products ranging from apparel to appliances produced by China at relatively low cost have flooded the shelves of superstores around the world in the past decade.

"Now, China is significant in terms of its internal market. It is the largest car market in the world. That is very significant for every auto manufacturer in the world. You have to participate in the largest market."

Helped by government measures to boost domestic consumption, particularly demand from rural areas, China has become the largest car market in the world, overtaking the US with a total sales volume of some 13 million vehicles last year.

What is more significant is that so many people in the country have yet to buy their first car, Chopra said, noting the huge potential in the home appliances market as well.

Meanwhile, in terms of international cooperation amid growing globalization, China also plays an increasingly significant role.

"China is becoming more and more significant just in terms of the international cooperation that it is creating. If you look at merger and acquisition (M&A) activities over the past 18 months, most M&As have come out of China," Chopra said.

Chinese companies are making acquisitions overseas rather than multinational corporations acquiring Chinese firms, he emphasized.

Source: China Daily


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