Standard Chartered Global Focus

Light at the end of the tunnel

• The world economy has certainly been given a massive push in the right direction through sizeable, sustained, and what looks like successful policy stimulus. The questions now being asked are, how sustainable is growth? And how soon can policy be tightened? • Across Asia, the data has been improving for some months. We expect Asia to enjoy steady but still (by Western standards) impressive growth in 2010. However, it is not possible for Asia to boom if the West is not booming. The trouble is that Asia is still heavily export-dependent. • The need for balance in the world economy has probably never been so acute. The West needs to save more; Asia and the Middle East need to spend more; and currencies need to adjust. • A key problem is the continued recent stability of the Chinese yuan against the dollar. The stability of the CNY is forcing many Asian countries to fight to keep their currencies stable. This is leading to the problem of asset price inflation in many countries. • Longer-term, policy makers need to fight protectionism in order to sustain global growth. The APEC summit in Singapore this month has rightly put this as its focus.

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