Volume 89 Issue 2 | p. 12
Issue Date: January 10, 2011

Cover Stories: World Chemical Outlook

Asia: Growth Is Strong, But Clouds Loom

Department: Business
Keywords: IMF, inflation, Asia, GDP

Hong Kong tenants considered themselves lucky in 2010 if their landlords asked for rent increases of less than 20%. Buoyed by strong economic conditions in China and the rest of Asia, property prices in Hong Kong, a regional banking center, surged in 2010. This year is shaping up to be another blistering one for Asia, although inflation may be on the horizon.

In late 2010, the Asian Development Bank revised its growth estimates for Asia upward, mainly because China was growing more strongly than expected. ADB estimates that the country’s GDP expanded by about 10% in 2010 and that growth this year will exceed 9%. Last year, China displaced Japan to become the world’s second-largest economy.

China’s economic growth in 2011 will be driven by a drop in inventories that will stimulate manufacturing, the Organization for Economic Cooperation & Development says. In addition, the Paris-based agency says, the central government will pilot initiatives to improve housing, health care, and infrastructure in major cities. Private consumption in China will be strong as a result of rising salaries, OECD adds.

Strong economic growth in China has in recent years helped to sustain the export-oriented Japanese economy. But the outlook for Japan in 2011 is for only 1.4% GDP growth, ADB says. Japanese exports of chemicals and other goods are slumping under the pressure of an appreciating yen. But Japan will not enter a new recession, OECD expects.

India, the third-largest economy in Asia and fourth-largest in the world, enjoyed strong economic conditions in 2010 and will likely continue to do so in 2011. Most Indians live in the countryside, and good rains last year helped agriculture. The health of the farming sector stimulated domestic demand, which led to strong business investment.

Robust economies in China, India, and other parts of Asia this year will translate into strong demand for construction materials, car components, and electronic devices made with the products of chemistry. For petrochemical producers, economic growth will help mitigate the prevailing conditions of oversupply.

But Asia may enjoy too much growth in 2011. Interest rates have been hiked in India to control excessive demand for loans. And government measures are being implemented in China to control rising food prices.

 
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