"In the last few day I have been at the Asian Development Bank meetings in Madrid and then visited Hong Kong and China. I have presented my view on the severity of the US recession and its potential effects on economic growth in China and Asia. Will this region decouple from the US economic contraction?
The answer depends on the severity of this recession. If the US recession is short and shallow (a V-shaped recession lasting six months) then there is enough of a domestic growth dynamics in the rest of the world and in Asia that the global economic slowdown would be very modest. But if the recession is more severe (a U-shaped recession lasting 12 to 18 months) then that US contraction, together with the sharp slowdown in the other G3 economies (a good fraction of the EU could be soon in a recession - specifically UK, Spain, Ireland, Italy and Portugal - and the rest of the EU is sharply slowing down; while Japan is also headed towards a recession) will negatively affect growth in China and Asia, much more than currently expected by macro analysts and markets. Direct and indirect trade channels, financial channels, credit crunch channels, dollar weakness channels and confidence channels would lead to a signifcant slowdown of growth in Asia. ..."
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The answer depends on the severity of this recession. If the US recession is short and shallow (a V-shaped recession lasting six months) then there is enough of a domestic growth dynamics in the rest of the world and in Asia that the global economic slowdown would be very modest. But if the recession is more severe (a U-shaped recession lasting 12 to 18 months) then that US contraction, together with the sharp slowdown in the other G3 economies (a good fraction of the EU could be soon in a recession - specifically UK, Spain, Ireland, Italy and Portugal - and the rest of the EU is sharply slowing down; while Japan is also headed towards a recession) will negatively affect growth in China and Asia, much more than currently expected by macro analysts and markets. Direct and indirect trade channels, financial channels, credit crunch channels, dollar weakness channels and confidence channels would lead to a signifcant slowdown of growth in Asia. ..."