The Mayans were wrong. The world won’t end in 2012, but at times it may feel as if it’s about to. Such is Asia’s lot as Europe’s debt debacle and America’s political paralysis fuse, presenting challenges for leaders from Beijing to Jakarta.
In a less chaotic time, this might have been Asia’s big moment. An eastward shift of power and capital would seem to be a given as Brussels and Washington turn inward. Yet a worsening global environment will interrupt Asia’s path to economic dominance. Here are eight risks that may get in Asia’s way:
Recoupling
Asia steered around the US meltdown in 2008 with remarkable agility. Doing that will be harder in the 12 months ahead as all of the world’s major growth engines stall or go into reverse. Default risks in Europe will increase, America’s funk will persist in an election year, Japan’s malaise will deepen and China will hit a soft patch. With deft fiscal and monetary maneuvering, Asia grew impressively in the three-plus years since Lehman Brothers Holdings imploded. A repeat performance is unlikely.
Pocketbook worries
Consumers will become more dissatisfied with the toxic mix of inflation and widening income inequality. Leaders aren’t doing enough to make sure benefits of growth are shared equitably. As the Gini coefficient — a statistical measure of wealth inequality — rises across Asia, increasing tensions will play out unpredictably in markets and politics.
Occupy Wukan
It’s getting harder for China to keep its 1.3 billion people from hearing about events in a coastal village in Guangdong province. There, thousands of people fed up with land seizures took to the streets and forced out Communist Party officials. This Occupy Wall Street dynamic is a startling contrast to the usual success China has in quashing any hint of public discord. As the New York Times points out, there are at least 625,000 potential Wukans in China. The 12 months ahead will be busy for China’s thought police.
Political intrigue
China, Hong Kong, South Korea and Taiwan will pick new leaders. State elections in India will help determine if Rahul Gandhi will soon replace his mother, Sonia Gandhi, as president of the ruling Congress Party. Taiwan’s contest could be a standout — a verdict on President Ma Ying-jeou’s economic policies and drive for better relations with China.
Territorial disputes in the South China Sea could bubble over. Violence might break out in Thailand if ousted Prime Minister Thaksin Shinawatra is allowed to return. In Burma, Aung San Suu Kyi’s move to register her party for elections will test the government’s recent steps toward democracy.
The Kim follies
A we get used to Kim Jong-un, not Kim Jong-il as North Korean leader, there’s no telling how things will unfold in Pyongyang. Will young Kim feel obliged to show he means business with missile launches into the South and nuclear tests? Might military generals coveting the top job rebel? The questions hover over all of Asia.
Internet clampdown
Beijing’s great wall of censorship is raising cyber clampdowns to an art form, the latest on Twitter-like services. Yet the Internet is under attack throughout Asia. India is stepping up efforts to require Facebook, Google and other portals to remove content that may be deemed offensive. South Korea and Thailand have been suppressing information. Balancing transparency and state control of information will become harder.
Japan’s debt trap
The conventional take is that Japan is in a liquidity trap, which makes it impossible for zero interest rates to stimulate the economy. The real problem is a debt trap, and the yen is part of it. On the one hand, a strong currency is prompting companies to go shopping overseas to hedge against the country’s aging population, lack of growth and a vulnerability to disasters. On the other, it is further hollowing out Japanese industry. That will lead Japan to add to its debt, the world’s largest, risking further credit downgrades.
China’s bust
It’s a make-or-break year for China’s efforts to defy the economic laws of gravity. A bad-debt hangover from the huge stimulus of recent years is a distinct possibility. Markedly slower growth would be a nightmare for a Communist Party obsessed with social stability.
Should the second-biggest economy join the United States, Europe and Japan in the slow-growth club, Asia would find itself in treacherous territory. It wouldn’t be the end of the world as the Mayans anticipated, but it would be different than the one we’ve come to know.
By William Pesek Bloomberg View columnist
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