China uplifting the whole Asian economy
(chinadaily.com.cn/NY Times)
Updated: 2005-10-10 09:01

The business landscape in nearly all Asian countries and regions looks pretty rosy, and global fund mangers say a booming China has played a central and largely benign role.

China is definitely the locomotive uplifting all its neighboring economies, which also have helped the former by injecting huge investments, analysts said.

Currently, stocks in Asia have been sprinting ahead. Markets in Singapore, South Korea and India have approached or surpassed previous highs, and others, like those of Hong Kong and Indonesia, are at their best levels since the economic crisis of the late 1990's.

The rallies have produced big gains for global mutual funds specializing in Asian stocks. The average fund that invests in Asia, excluding Japan, was up 30.4 percent in the 12 months through September.

Managers of Asia funds have no trouble explaining the strong performance, but some question its staying power and are downshifting to stocks in industries less susceptible to economic swings. Some global fund managers also express reservations about Asia, although others embrace the region and expect continued strength.

Yet everyone seems to agree on one idea: that China has had a central and largely benign role. From a distance, China might look able to muscle aside the industries of smaller Asian countries and to squeeze their markets, given its cheap labor and huge manufacturing capacity. But analysts say the formerly know Four Asian Tigers, South Korea, Singapore, Taiwan and Hong Kong, have instead grabbed their big neighbor by the tail. They have invested huge sums in Chinese mainland factories, and so have made growing profits.

"As China has grown, it has brought up the rest of the region with it," said Edmund Harriss, manager of the Guinness Atkinson Asia Focus fund, in an interview by The New York Times.

Mark Headley, president of Matthews International Capital Management, a firm specializing in Asia, said the rest of the region had also brought up China, by furnishing money and expertise.

"It's the Taiwanese that built most of the mainland's manufacturing, and now the Koreans are there in a big way," he said. "The companies that really grasped the opportunities 10 years ago are reaping the benefits."

So are Chinese workers, whose standard of living has soared. That has benefited companies throughout Asia, which have a big, new consumer market to pursue.
"Because Chinese GDP is growing at 8 to 10 percent, it provides a huge source of incremental demand for other Asian countries selling to domestic Chinese consumers," said Ben Walker, a manager of international equity funds at Gartmore Investment Management.

The low cost of Chinese-made products also helps the region, Mr. Walker said. "Increasing supply from China is keeping inflation lower in Asian economies," he said.