Asia the place to invest after a US financial crash (page 1 of 2)

Officially, the US has a GDP of about US$11 trillion, while China's GDP amounts to US$1.1 trillion and India's to about US$500 billion.

Moreover, whereas the world's GDP stands at about US$32 trillion and the advanced economies have a combined GDP of US$25 trillion (G7: US$21 trillion), the emerging Asian economies (including China and India, but excluding Hong Kong, Japan, Singapore, South Korea, and Taiwan - countries that are classified as advanced economies) have a GDP of just US$2.2 trillion.

However, if we look at some production figures, it becomes obvious that the US economy is nowhere near ten times as large as the Chinese economy or more than 20 times the size of India's GDP. Neither do the G7 countries have a GDP ten times larger than the emerging Asian countries. According to The Economist's World in Figures 2003 directory, China ranks as the world's largest producer of cereals, meat, fruits, vegetables, rice, zinc, tin, and cotton.

It is the world's second-largest producer of wheat, coarse grains, tea, lead, raw wool, major oil seeds, and coal, the world third-largest producer of aluminium and energy (measured in million tonnes of coal equivalent), and ranks between fourth and sixth in the production of sugar, copper, precious metals, and rubber.

India ranks among the top three producers of cereals, fruits, vegetables, wheat, rice, sugar, tea (number one for the latter two), and cotton. Indonesia ranks among the top four producers of rice, coffee, cocoa, copper, tin, and rubber; while Thailand is the world's largest producer of rubber, and Vietnam the world's second-largest producer of coffee.

'So what?' some readers may think, since these are just commodities and thus are irrelevant in post-industrialized societies! However, if we consider that China is already the world's largest manufacturer of textiles, garments, footwear, steel, refrigerators, TVs, radios, toys, office products, and motorcycles, just to mention a few product lines, and if we then add the industrial production of Japan, Taiwan, South Korea, and India, we get a totally different picture of the size of the Asian economies than is suggested by statistics based purely on nominal GDP figures, which don't take into account the difference in the price level between different countries.

In fact, statisticians, in order to account for the fact that in some countries the price level is far lower than in the Western industrialized countries (such as is the case for most emerging economies), have calculated the GDP level based on purchasing power parities (PPP). And while I have some doubts about the methodology of PPP-adjusted GDP figures, it is nevertheless interesting to see how large the emerging economies are when based on this measurement.

Asia (including China, Japan, India, South Korea, Indonesia, Taiwan, Thailand, the Philippines, Pakistan, Bangladesh, Malaysia, Hong Kong, and Vietnam) has a PPP-adjusted GDP of US$14 trillion, which is 50% larger than the US's PPP-adjusted GDP of US$9.6 trillion. In fact, by this measurement, Asia, in which we should probably also include Central Asia, Australia and New Zealand, as well as parts of Far East Russia, would be by far the world's largest economic bloc.

And while, as just metioned, I have some reservations about PPP adjustments, in general I think that it is fair to say that the PPP-adjusted figures reflect a far more realistic picture of the size and importance of the Asian economic bloc with its 3.6 billion people (61% of the world's population) than do the nominal GDP figures, which suggest that the US has a GDP ten times that of China.