It has been a milestone year for China and the US, and for very different reasons.
For China, 2008 marked the 30th anniversary of the pro-market policies unleashed by Deng Xiaoping. As China celebrated the fruits of capitalism, the US was veering sharply in the other direction, beginning the process of nationalizing key industries.
It is hard to ignore how far the US government got into the insurance, auto and banking businesses in 2008, while China pledged to stay the capitalist course. This contrast alone captured the seriousness, absurdity and disorienting nature of a world many thought they understood a year ago.
Words seemed to fail us in 2008. Whether the event was smoke billowing from the Taj Mahal Palace and Tower hotel in Mumbai, riots in Bangkok, former Taiwan president Chen Shui-bian in handcuffs, food lines in Indonesia, hula dancers gyrating for Barack Obama, Japan celebrating the new US President or throngs of angry shareholders in Singapore, pictures said it all.
Who can forget the images of Hong Kong’s first bank run in a decade, Korean traders staring in shock at their computer screens or levelled schools following the 12 May earthquake in China’s Sichuan province? Poignant TV shots of the Beijing Olympics that cost $40 billion (Rs1.96 trillion at the current exchange rate) to stage were later eclipsed by those of Chinese peasants protesting against job losses.
Yes, 2008 was the year all hell broke loose. It is worth looking back at the events, people and ideas that made Asia’s year so memorable.
Drum roll, please.
Fake-out award: To the decoupling theory. It was always silly to think Asia’s disparate and developing economies could thrive if the $14 trillion US economy hit a wall. That was the conventional wisdom a year ago as the credit crisis spread around the globe. Asia has decoupled from the decoupling hype.
The It award: To the Japanese yen, which was among the few things that actually rose in the markets. Its 23% surge versus the dollar in 2008 came as the US slid into recession and investors fled risky assets. Japan isn’t happy about the yen’s allure. It threatens to push the economy back towards deflation.
Wrecking ball award: To Thaksin Shinawatra, the former prime minister who can’t seem to stop undermining Thailand. Far from being silenced by the 2006 coup that ousted him, Thaksin remains a thorn in the side of his numerous successors. Thailand just elected its third prime minister in four months, a dynamic that is scaring investors away from one of Asia’s most promising economies. Thaksin’s supporters are—surprise, surprise—speaking out against him, too.
Odd couple award: To China and India, or Chindia. The theory is that as much as China and India might compete, they would complement each other. This always had a certain appeal. As the world faces its worst crisis in seven decades, Asia should be moving closer together. Instead, leaders, including those in China and India, are turning inward.
Soul man award: To Muntadar al-Zeidi, the Iraqi journalist who threw his shoes at US President George W. Bush. Whether Zeidi will live a life of riches after auctioning off his famous shoes to the highest bidder or behind bars is anyone’s guess. He provided one of the more memorable moments of a memorable presidency.
Hobbled giants award: To China and America, or Chimerica. That’s what Niall Ferguson, author of The Ascent of Money, dubbed the relationship between the world’s No. 4 and No. 1 economies. Donald Straszheim, vice-chairman of Newport Beach, California-based Roth Capital Partners Llc., calls the forced collaboration between China’s savers and the US’ consumers the Group of Two. Where Chimerica goes, the global economy will follow.
Wile E Coyote award: To China and the US. China’s tainted milk scandal highlighted the dark side of the nation’s unrestrained industrial boom. The demise of Bear Stearns Companies Inc., Lehman Brothers Holdings Inc. and Bernard Madoff showed the US has cracks in its financial system. Both are looking down wondering where the ground went.
Snake eyes award: To Macau, for helping prove gambling isn’t a recession-proof industry after all. Las Vegas Sands Corp., controlled by billionaire Sheldon Adelson, said in November it halted a $12 billion project in Macau. It seems Macau, like Las Vegas, has run out of luck.
Something for nothing award: To the Bank of Japan and the US Federal Reserve, which effectively cut interest rates to zero. It is hard to decide who would be more dismayed by this turn of events—Milton Friedman or John Maynard Keynes. Karl Marx, by contrast, might be just fine with the socialist state of the monetary world. It is not clear anyone else is.
Big spender award: To sovereign wealth funds, which ended the year wondering where it all went so wrong. China can’t be very happy with its multibillion dollar investments in Blackstone Group Lp and Morgan Stanley. Ditto for Singapore, which invested in Merrill Lynch and Co. In 2008, cash-rich nations learnt the best way to make a small fortune was to invest a large fortune. So did the rest of us.
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