Domestic consumption is gaining ground on foreign investment as the main driver for economic growth ...
Domestic consumption is gaining ground on foreign investment as the main driver for economic growth in a number of developing Asian countries, according to Schroders' chief investment officer for Pacific ex-Japan Equities, Leong Wah Kheong.
That makes the region less reliant on foreign outsourcing of manufacture from places such as the US and Japan. Historically, said Wah Kheong, this investment has provided a basis for sustainable growth in Asia.
He added: 'In places such as Korea, it is becoming more evident that domestic consumption is overtaking foreign investment as the engine of growth.
'For example, exports contributed 2.5% to Korea's GDP growth in 1991 compared with 0.5% in 2001. Korea has had the benefit of a very strong stock and property market in the past 12 months.'
Because of this, policymakers in some of the Asian countries are re-assessing their economic models, he said, to support increasing domestic consumption as lower costs of production in China capture more foreign direct investment flows.
He said: 'Thailand is following the Korean trend, but in other parts of the region, such as Taiwan and Singapore, domestic economies are not yet in a position to rely predominantly on domestic consumption and are still very reliant on external demand.'
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