The Recovery Is at Risk

As asia's 1997 economic crisis painfully demonstrated, the region's export-centric growth model is not without pitfalls. While critical lessons have been learned from that wrenching period, Asia has lingering vulnerabilities. Two soft spots are likely to prove especially vexing: the region's dependence upon mainland China and the policies of the U.S. Federal Reserve. A looming slowdown in China's economy will undermine Asia's newest source of external demand, whereas the pending normalization of U.S. interest rates could convince American consumers, the region's oldest and most reliable source of external demand, to cut back on spending. Lacking in self-sustaining demand from homegrown consumers,...

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