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Daily Archives: May 18, 2009

Why has Asia been hit so hard in financial crisis?

The author at IMF attributed the reason to the fact that Asian countries specialize too much in advanced manufacturing. This is in sharp contrast to China, which specializes in low-end manufacturing.

I call China’s ability to weather this financial storm, “the Walmart Effect”, where during economic recession, the demand for necessity goods tends to decline less than the demand for durable and (or) luxury goods.

Another reason, as I discussed previously, is that China’s export sector plays a much smaller role in China’s GDP growth than commonly thought.

Anyway, the graphs below are stunning (graph courtesy of IMF):

(click to enlarge; source: IMF)

You can read the full presentation of the titled research here.