Exports versus Consumers in Asia

With everyone sitting around waiting for the FED, here’s an interesting distraction. Today’s infoporn starts with an intriguing graphic in yesterday’s WSJ:


A recent article in the Economist was brought to our attention
(Thanks, Larry!) that looks at the burgeoning property laws in China.
There can be little doubt that this is a very significant move by

The creation of mortgage products is something new in that country.

This is likely a transition from Communism towards full bore
property rights. This development does not mean the end of centrally
planned economies, but it is a substantial move away from
collectivization, vis-à-vis establishing property rights.

The Economist notes:

"Clearer, enforceable property rights are essential if China’s fantastic 30-year
boom is to continue and if the tensions it has generated are to be managed
without widespread violence. Every month sees thousands of protests across China
by poor farmers outraged at the expropriation of their land for piffling or no
compensation. As in previous years, placating those left behind in China’s rush
for growth has been a main theme of the NPC.

In the cities, and of greater importance to the decision-makers
pushing the law through, a growing middle class with its wealth tied up
in houses wants to pass these assets on to their only children. These
people are anxious about the security of their property and, like their
fellows in the countryside, are becoming more assertive. In other
countries the emergence of this group as an important political
constituency has been followed by an unstoppable drift towards greater

The entire concept is fascinating: China and India, two nations of
savers, both export-dependent economies, thinking about developing more
of a consumer culture.

As the old saying goes, be careful what you wish for . . .


For India and China, Credit Poses a Challenge
U.S. Mortgage Woes Highlight Pitfalls Faced
By Two Asian Nations’ Fledgling Consumer Lenders

JAMES T. AREDDY in Shanghai and ERIC BELLMAN in Mumbai
WSJ, March 20, 2007

Property rights in China:  China’s next revolution
The Economist, Mar 8th 2007

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What's been said:

Discussions found on the web:
  1. lurker commented on Mar 21

    exactly. consuming what? what’s left of the planet after the great american gorgefest…

  2. Philippe commented on Mar 21

    These accounts surpluses are quiet cheering but do they reflect the true wealth of nations,when knowing that so many domestic investments are needed for improving domestic infrastructures,plants rehabilitation, educational system medical care?.

  3. THD commented on Mar 21

    What struck me about the ATM and bank branch highlights of China and India is the question of how relevant are these metrics/what are they actually a measure of?

    With the deployment of mobile banking and use of SMS to pay for consumer goods, ATMs are not as widely needed and neither are banks compared to a place like the US.

    On this note an interesting “infomercial” can be seen on YouTube about mobile banking:

    Also, a report on m-banking and ATMs can be viewed here:

  4. Fred commented on Mar 21

    That is a fantastic graphic.

    America’s savings rate is pathetic. And I bet the only reason the UK’s looks good is all the Russian money stashed there.

  5. akhondofswat commented on Mar 21

    India is not an export-led economy by any stretch of the imagination. Domestic consumption makes up almost two-thirds of its GDP.

  6. Winston Munn commented on Mar 21

    What is missing from this globalization and “free trade” argument is part of the basis of the original theory, i.e., imports must equal exports. As Ravi Batra foresaw, what has happend in the U.S. is a replacement of an industrial-based middle class with a service-industry middle class, and a resultant loss of income.

    It is my view that this loss of wages has a direct bearing on the negative savings rate seen in this country, with people trying to maintain a standard of living with a declining ability to do so.

    The only question is: who will China then outsource to?

  7. Bluzer commented on Mar 22

    As Ravi Batra foresaw, what has happend in the U.S. is a replacement of an industrial-based middle class with a service-industry middle class, and a resultant loss of income.
    Excellent observation.

    The only question is: who will China then outsource to?

    Probably no one. They will grow the way the US did in the 1950 thru 1980 period. By utilizing an industrial base to create wealth and then dispersing it through the population the living standards of the entire nation can rise reinforcing demand in a virtuous cycle. The key is in the creation of a large enough middle class.

    If they are successful in this, the last few years with its reliance on the US market, will be seen, when viewed thru the lens of history, as merely a catalyst to spark a self sustaining middle class. A ‘bootstrap’ process if you will.

    They sure live in interesting times.

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