Asia’s way to deal with Trumponomics
It took Asia by surprise. Now the United States is entering the Trump era. It’s time for Asia to grasp what it means, to brace itself for what’s next, and to plan for adapting for the possible changes.
So, what to do? People in Asia must think about their options and make their own decisions while Trumponomics is unfolding. More specifically, what to do for Asia to sustain its thousands of small businesses?
What to do for Asia to create more opportunities, with more income, for its millions of families?
And what to do for Asia to ensure for itself a better chance at taking advantage of the next turn of events in the world economy?
At least, it’s time to think what Asia can do to at least avoid the kind of predicament it went through in the financial turmoil of 1997-98, when currencies collapsed, jobs were lost, and development stunted.
In times of an imminent change, there are only two things to do in general. One is to stay out of trouble. The other is to do the right thing to help oneself.
With Hong Kong perhaps the only exception, most Asian economies have long abandoned the attempt to peg their currency to the US dollar, a policy that once courted currency attacks.
A more fundamental thing to do at a likely troublesome time is to be more focused on financial commitment—be it a government, a business or a household.
It is to borrow less, to spend less, and to commit less.
Deleveraging, as it is called, is not a difficult task for corporate entities.
For banks, it is to watch more closely the credit standing of clients and control nonperforming loans. And for corporations, the common solutions include winding up unprofitable operations and trimming the spending budget.
Things would be different for a government, however.
In part, it’s because a government’s spending budget tends to carry huge social significance, which includes many public programs and projects, which it should simply refuse to allow to be cut or attenuated.
That is essentially a challenge as to how Asian countries can keep generating a stream of revenue. A realistic alternative is to trade among themselves.
Asia’s regional trade relations have largely been amicable, even when countries are still negotiating for the Regional Comprehensive Economic Partnership, or RCEP, a free trade deal initiated by Asean, which Western media tend to describe as China’s game.
China has never shown an interest in rivaling Asean for making rules for regional economic ties.
Admittedly, the size of Asia’s regional trade cannot compare with its trade with the United States. Yet it is stable, and can provide a sustainable source of income in a time of uncertainties.
However, if Donald Trump wants to protect the United States from trading with Asia, he doesn’t need to be irritated by trade among Asians themselves. Nor is the size of regional trade necessarily small.
In the long run, however, Asian countries will have to reduce their dependence on export revenue in order to become more resilient modern economies.
Building public infrastructure is a most reliable way for a country to involve more of its people and its cities into modern industries and services.
Asia’s realities, its complex landscape, for example, easily betray its need for heavy infrastructure investment over a long period to come.
The problem in this area, more often than not, is not a government’s excessive commitment, but inadequate funding, so much so that it cannot concentrate on even a small number of projects.
As capital of the entire world is being attracted by the rising dollar value and the prospects for investment returns from the United States, it actually may be good timing for Asian governments to each embark on one or two development projects of this kind, so long as they can manage public funds in a more focused way.
In due time, there will be more changes.
Most importantly, globalization is a global phenomenon. It’s like a marathon. The game doesn’t stop because one or two lead runners want to take a rest. All dogged efforts will pay off.
Ed Zhang is editor-at-large of China Daily (Asia), Hong Kong.
