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This article was first published in the April 2016 international edition of Accounting and Business magazine.

Confidence in the global economy has taken a knock recently, raising concerns about Asian economies because of their export dependence and extensive linkages with wildly gyrating global financial markets. However, while China’s economy does look wobbly, the pessimism appears to be excessive. In essence, we see three major positives for Asian economies outside China. 

Lower oil prices 

Oil prices plunged in late 2014 but the expected boost to growth has not been manifested clearly. This is because the losers from low oil prices – oil exporting countries, big oil companies and the huge industry that supports them – reacted swiftly by slashing spending and hiring. However, the many winners waited to see if the fall in prices would be permanent before reacting: consumers initially chose to save their gains from low energy and transportation prices while businesses took their time before hiring and expanding capacity. The good news is that we are reaching an inflexion point when the net benefits of low oil prices really start to flow. For example, recent weeks have seen more Asian airlines announcing expansion plans. 

US economy

The US economy decelerated in late 2015 and started this year weakly as weather and other temporary headwinds stalled recovery. But the US labour market has continued to firm and wages are growing a tad faster. Housing continues its uptrend and small businesses seem more confident. And in recent days we have seen signs of a possible upturn in capital spending – demand for durable goods rose while orders for semiconductor equipment are rebounding. This is good news because Asia’s exports of manufactured goods are highly correlated with capital spending.

Domestic cycles

Outside China, Asian economies’ domestically driven cycles seem to be rising again. Countries as diverse as Japan, India, Indonesia and Malaysia took a hit in 2014-15 from policy reforms such as new taxes and cuts in subsidies. Others endured political uncertainty or weather damage. Now, most of these countries are moving ahead. In several, such as Indonesia and Thailand, stepped-up fiscal spending on high-multiplier infrastructure projects is boosting domestic demand. 

China impact

Chinese policy-makers are ramping up stimulus measures. The surge in bank lending in January and the announcement of more big-ticket infrastructure projects show that such measures are starting to have an impact. So long as policy-makers can contain the risks in China’s economy, with a mix of stimulus and structural reforms, the economy is unlikely to crash. However, it will almost certainly grow more slowly than it has been since the early 1990s and Chinese import demand will not boost growth around Asia any time soon. This will not be good for exporters of natural resources such as coal and iron ore, nor for those who ship capital equipment to China. However, many Asian countries, especially in South-East Asia, export food-related commodities such as rice, palm oil and cassava and will be less affected. South-East Asian economies are also likely to continue to benefit from the influx of Chinese tourists – the tight labour market in China is pushing household incomes up, prompting many to holiday abroad.

Risks do persist and China remains a worry. However, so long as the three factors outlined above support Asian growth, these risks are likely to be contained.

Manu Bhaskaran is CEO of Centennial Asia Advisors in Singapore