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"There Is Little Debate in Asia About How Well [the Economic] Stimulus Has Worked..."

China2019s Ships Anchored by Export Drop, But Shanghai Port Planning for Future - The Jakarta Globe

David Pilling:

Asia’s Keynesians take pride in prudence: [Asian] governments have been as bold as any in opening the fiscal sluices. One reason is the bitter memory of the 1997 Asian financial crisis when the International Monetary Fund imposed fiscal austerity on several Asian countries.... According to Fitch Ratings, fiscal stimulus packages as a percentage of gross domestic product amounted to 6.9 per cent for Vietnam, 7.7 per cent for Thailand, 8 per cent for Singapore, 13.5 per cent for China, and a whopping 14.6 per cent for Japan. Taiwan, with a relatively modest stimulus of 3.8 per cent, gave $100 spending vouchers to each of its 23m inhabitants, including convicts. The Singaporean government subsidised businesses that retained staff. In China, the mother of all stimulus packages funnelled $585bn of spending into the economy, and even more through directing state-controlled banks to increase credit....

Asian governments had plumped-up their fiscal cushions after the 1997 crisis, building a formidable pool of reserves. Such “prudence” meant, rather bizarrely, that poor countries such as China were foregoing spending and investment in order to facilitate rich foreigner’ binge-buying. But it also meant that, when the crunch came, they had the wherewithal to spend.

Unlike in the west, there is little debate in Asia about how well the stimulus worked. It has been spectacular. Asian output is well above pre-crisis levels. HSBC is predicting growth for Asia ex-Japan of 8.6 per cent this year.... Fears about unemployment have given way to concerns about labour shortages and spiralling wage demands. Thus the question in most of Asia is not whether to remove stimulus, but how fast. Asia is in orthodox territory, balancing well-trodden trade-offs between growth and inflation...

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