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Its the Asian century for sure, but how much of Asia is actually impacting the world? Does Asia have the strength to stop America from sinking into a recession? According to a Xinhua News Agency story, Asia’s super charged growth is preventing America from drowning in depression.

“We are experiencing the first episode in history of reverse coupling, in which the rest of the world pulls the U.S. forward rather than the opposite,” said Fred Bergsten, director of the Peterson Institute for International Economics, a leading think tank in the United States.

Bergsten told Xinhua that he believed that “trade has saved America from recession” because “the improvement in trade balance has accounted for the totality of U.S. economic growth over the three quarters.”

In spite of the pronouncements of many observers, recession has already set in, the U.S. economy grew at an annual rate of 1.9percent in the second quarter of this year, up from a 0.6-percent increase in the first quarter and a 0.2-percent decline in the fourth quarter last year.

Apparently, the strong dynamism of domestic demand in emerging and developing economies has provided a “trade shock absorber,” enabling a robust expansion of U.S. exports over the past year even as U.S. domestic demand has slowed, said a recent report by the International Monetary Fund (IMF). China, the biggest emerging market, is now contributing more to global demand than the United States, added Jim O’Neill, chief economist at Goldman Sachs.

Analysts believe there have been two important shifts in the growth dynamic of the global economy.

The first is that emerging economies have been transformed into locomotives of the world economy. The BRICs have accounted for almost half of global growth and all the emerging and developing economies together for about two-thirds, compared with about half in the 1970s.

Secondly, the pattern of trade has changed. Almost half of exports from emerging and developing economies are now directed towards other such economies, with rising intra-regional trade within emerging Asia most notable.

Africa has also benefited from the emerging economies. Investment commitments in Africa by emerging financiers jumped from less than US$1 billion per year before 2004 to US$5 billion in 2007, said a recent report by the World Bank.

Growing infrastructure commitments by emerging countries in Africa are helping address the huge infrastructure deficit of the continent, Obiageli Katryn Ezekwesili, the World Bank’s vice president for the Africa region told Xinhua.

As a result, the global economy has clearly decoupled itself from the United States and world growth is likely to approach 4 percent in both 2008 and 2009 in spite of the sharp slowdown in the United States, said Bergstan.

“The traditional relationship where the world catches cold when the U.S. sneezes’ no longer holds,” he noted.

This entry was posted on Thursday, August 28th, 2008 at 10:30 am and is filed under Economy, Foreign Trade. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.