Latest economic crisis forces Asia to seek new economic paradigm

But Luis Kuijs, a senior economist for the World Bank in China, argued that the Chinese government was still moving too slowly on the reforms that the Bank sees as essential to sustaining high growth over the next few years.

“Now that the government has basically succeeded in dampening the impact of the global crisis, it is a good time to concentrate and focus efforts on the structural reforms that are needed to rebalance and get more out of the domestic economy on a sustained basis,” Kuijs wrote in a report on China's third-quarter economic performance.

“Achieving this calls for more emphasis on consumption and services, and less on investment and industry,” he said.

Many U.S. and European economists and politicians have continued to call for China to allow faster appreciation of its renminbi currency, which remains mainly linked to the U.S. dollar with a narrow margin for daily fluctuation. The critics worry that China's industrial overcapacity is affecting economic growth in dozens of industries across the world and is diluting the government's efforts to rebalance the economy.

Ben Simpfendorfer, an economist with the Royal Bank of Scotland in Hong Kong, said reforms appeared to have slowed as China focused on measures to limit the effects of the global economic crisis.

“Prior to the economic crisis, China was pushing ahead with market-driven rebalancing,” Simpfendorfer said in a briefing note in November. “However, such efforts stalled in the wake of the crisis and currency appreciation, among other reforms, is not expected to resume until mid-2010,” he said.

With the slow growth of consumption in China, real questions remain about whether Asians will ever fill the gap left by the American super consumers, who spend eight times more than the average Chinese and 16 times more than the average Indian.

The big difference between Asian consumers and their American counterparts is that the former have not yet learned to consume beyond their incomes.

“The average indebtedness of the Asian household is close to 20-30 percent compared with 100-120 percent in the U.S.,” UNCTAD's Supachai told the German Press Agency, dpa.

“One thing they have to learn from Asia is you have to consume more but don't consume more on the basis of creating more debts.”

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