Will a U.S. Recession Spread to Asia?
The sudden drop in American investor confidence caused a dramatic decline in the NYSE, triggering selloffs in the stock markets of China and India and leading the way for huge declines in Japan, South Korea and the Asean nations. International fund managers had invested their clients’ monies in all of these markets. Expecting all markets to decline, they sold down their holdings worldwide in a dramatic, synchronized fall. But China’s and India’s economies are no longer as dependent on exports to U.S. and EU markets as they used to be. While they may lose some percentage points in their growth rates, they still should be able to reach 6% to 8% growth annually. This economic downturn will mark the first time that when America sneezes, Asia doesn’t catch a cold. Asia will be affected, but not as severely (see p. 19 for a contrary view). Because China and India will not experience a recession, Japan, South Korea, Taiwan and the Asean countries will avoid it. Hence, Asian stock markets will
