Newspaper article The Christian Science Monitor

China Spurs Asia Economies but Challenges Still Remain

Newspaper article The Christian Science Monitor

China Spurs Asia Economies but Challenges Still Remain

Article excerpt

`EMERGING" markets? This term for fast-developing economies, particularly in East Asia, has seemed quite an understatement in the past few years. The Hong Kong stock market blazed ahead of American and other developed-nation exchanges with a 78 percent gain in 1993. Last year, Asia attracted only slightly less investment, measured in net capital flows, than the rest of the world combined.

The driving force has been the rapid growth of China, the world's biggest emerging market. But what's next for China and its neighbors? Robert Broadfoot, a Hong Kong consultant who has kept close tabs on Asia for two decades, offers an optimistic view, but cautions that there are also many risks.

China's industrial takeoff has created huge markets for both imports (growing close to 30 percent a year) and investments by outside companies forming subsidiaries and joint ventures. Foreign direct investment soared to $30 billion in new commitments last year.

"One of our clients did $1.8 billion worth of business in China with a 54 percent profit margin" last year, says Mr. Broadfoot, who is managing director of Political and Economic Risk Consultancy Ltd., based in Hong Kong.

So for many companies, risk No. 1 is to fail to tap into this burgeoning market of 1.2 billion people.

Speaking to US Bank's international division in Seattle recently, Broadfoot said the infrastructure sector (transportation, power, communications) is growing particularly fast.

His consulting firm forecasts Asia's share of world air travel rising from 25 percent today to 40 percent by 2010. In the next four years, Asia's developing nations will add more than 50 million phone lines, including 18 million in China.

Lest investors get too euphoric, however, Broadfoot notes that Beijing must create a commercial banking system and cut the bureaucracy. Other challenges include:

Central government authority. …

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