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Updated Tuesday, December 8, 2009 10:53 am TWN, By William Pesek, Bloomberg

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Gross, Roubini weigh Chinese bubbles

Yet it's the expectations bubble that may prove more damaging. In Hanoi last week, officials I met seemed convinced Chinese growth would save the day. For all the worries about the unvalued yuan hurting Vietnam's exports, there's confidence that strong growth in a U$4.3 trillion economy will buoy Asia.

Asia's growth is feeding complacency. Take South Korea's Min Euoo Sung, who laments KDB Financial Group Inc.'s failed effort to buy Lehman Brothers Holdings Inc. in September 2008.

“We missed a very good opportunity,” Chairman Min told Bomi Lim of Bloomberg News on Nov. 16. “I think we could have avoided a situation where Lehman collapsed so rapidly.”

Yeah, sure — and taken Korea down with you. Min's comments smack of a hubris Asia can't afford. Korea is doing well today, and can take pride in proving wrong those who said it might become the next Iceland. Some perspective is in order, though.

Asia has indeed fared better than the U.S. and Europe. That's no reason to declare victory and move on. The region still needs to rebalance its growth model, deepen financial markets, improve the quality of government and cooperate more.

Min's if-only-we'd-grabbed-Lehman musings are highly unwelcome. KDB is state-owned and Min was publicly scolded by lawmakers for even attempting the deal. Lehman's radioactive portfolio would've dented confidence in South Korea at the worst possible time. Free-market folks abhor governments interfering in business. In this case, Korea's leaders served their people well.

Asia's confidence reflects its status as the only region still growing solidly. It also avoided the excesses that did in the U.S. financial system — not to mention the global one.

On Friday, a senior Chinese official, Li Wei, condemned Western investment banks for “fraudulent practices” that partly caused more than 11.4 billion yuan (U$1.67 billion) of derivatives losses at state-owned companies last year. Expect more such charges from Asia.

Just because Asia deserves a pat on the back doesn't mean 2010 will be an easy year. And that speaks to Gross's point. The stimulus efforts rolled out in China and the rest of Asia are keeping growth aloft. The sustainability of that growth is becoming less certain with the other major economies limping along.

Friday's news that U.S. employers in November cut the fewest jobs since the recession began, and the unemployment rate fell, offered a ray of hope. It hardly means the kind of robust U.S. recovery Asia needs is afoot.

Just as Dubai suddenly finds the ground below its economy shifting, Asia's export-driven economies may lose their footing amid shaky global demand.

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