After economic storm, Asia faces 2010 political risks
Over the past year Asia has been able to withstand the various pressures from the global economic recession and financial meltdown. This comes as the prospects for future economic growth are as bright as ever, once a recovery begins. Yet, beneath the surface are a number of different political and economic factors which could cause uncertainty. This could force the different equity markets throughout the region to go into a free fall.
Two Sides
The biggest factor that is going to be effecting economic growth along with politics is the relationship between China and the United States. Currently both countries have major political clout in the world; yet, China is continuing to grow rapidly with its economy expected to surpass Japan as the second largest economy in the world. While this is encouraging, there have been a number of differences that could affect the political as well as economic stability of the region to include: Beijing’s willingness to move slowly in revaluing the currency, trade restrictions, human rights, the rising increase of military spending and most notably its support of terrorist leaning regimes. The support of states such as North Korea and Iran have added to the overall political instability, especially when you consider the possibility that if the leader of North Korea (Kim Jong Il) dies the country will be even more unpredictable.
Other Issues
Then there is terrorism, with India and Pakistan dealing with their own radical militant threats. However, if another Mumbai style attack takes place, India could begin unilaterally engaging terrorists in Pakistan. This could spark a larger regional war between two traditional enemies.
Political Instability
Another factor that could affect the growth of Asia is political instability. A good example of this can be seen in Thailand, where a coup has taken place and overthrown the democratically elected government. The region has experienced disruptions in trade because of these different political problems; anything prolonged could have a major effect on trade.
Clearly, Asia has the possibility of providing above average economic growth. Yet, it faces many different scenarios that could cause the markets to go into a free fall. It is through understanding these different risks that will help provide a glimpse as to what Asia has to offer.
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