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Asia Rising:Why America Will Prosper as Asia's Economies Boom

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Jim Rohwer's Asia Rising is unquestionably the best book to come out and explain the Asian growth that has propelled Asia to the centerstage of the global economy. While some people may now look at the book's title and say, hey, how wrong he has been in his prediction -- they will end up judging the book by the cover, literally. In fact, if one throws away the first 20 pages of his book, his book indeed cautions and seriously warns of the problems in Asia and its potential consequences -- just as it analyses and lauds the power of the Asian growth with journalist's skill for clarity and an economists eye for numerical detail. I read this book twice and still use it as a reference guide in my work as a financial journalist based in Taipei, a country least affected by the Asian crisis. Mr.Rohwer, formerly Asia expert at the economist who now works for Fortune, has also been brilliantly following and writing on Asia in the aftermath of the great Asian implosion. His recent article in Fortune entitled "Why Taiwan may be next to fall" made full sense even if the officials here rejected it with perverse pretention. Indeed, Taiwan has most of the problems that has existed in other Asian countries, but the only thing that saved it from the contagion like China is due to their closed financial systems. But the global deflation and slowdown in trade is now taking a toll on the growth of the export-driven Taiwan. This will continue to pose major problems in 1999. As corporate earnings deteriorate, banks are now seeing their bad loan ratios double just as their spreads are being squeezed by falling interest rates. And banks are making little money now but are asked to set aside massive amount of loan loss provisions. This phenonmenon is now leading to a credit crunch in the banking system which is making it very difficult for companies to get money to cope with this severe economic downturn. The system is now in a dangerous catch-22 situation. As Mr.Rohwer pointed out financial crises do not have to a direct result of a cross-country contagion, but locally-developed ones can be quite as lethal. And this will not come into being when things are good overseas and companies can ride on the export boom, but, to quote Warren Buffet, bare bottoms will surface only when the water level drops in a swimming pool full of naked swimmers. TN

First, a bit of bad news: Rohwer died in a boating accident in France in Sept, 2001. So there won't be a second edition to this or any of his other books.

Rohwer (Berkeley MA in Economics, Harvard JD), who was an investment banker with CSFB in Hong Kong, brought a unique set of qualifications to his research. Some people criticized Rohwer for failing to predict the Asian economic crisis in 1998. (One book has the title: "Asia Falling".) But he did, on page 18: "My guess in that, around 2000, Asia's economic growth will suddenly slow down." This book was first published in 1995, so he saw it coming - even though his timing wasn't perfect. The fact that he made such a prediction, contrary to the tone and theme of his own book, is suggestive. Rohwer was prophetic.

Rohwer's sequel: "Remade in America" is just as good. Writing at the height of America's boom, he saw America's slowdown coming, and went on to suggest continuing strength in China's growth. Nothing has happened so far to contradict anything Rohwer wrote.

Other books I also recommend include "Thunder from the East" by Nicholas Kristof & Sheryl WuDunn. This couple won the Pulitzer Prize for the NY Times for their China reporting, and their CVs are sterling. "The Rise of China" by William Overholt (Harvard BA, Yale PhD), a former banker at Bankers Trust in Hong Kong, is slightly dated, but shows the brilliant judgment of the author. "China's Economic Transformation" by Professor Gregory Chow, Princeton University's former chief of econometrics, brings Chow's specialist quantitative skills to bear on an authoritative analysis of China's economy. All these authors would no doubt support Rohwer's findings and applaud his outstanding research. I myself can't praise Rohwer enough.

This book covers Asia from quite a few unexpected angles, including politics, family and culture. The first thing I liked about it is that it's not a book that gives the idea that the rise of Asia is a bad thing for the United States. Mr. Rower doesn't just focus on China, he hits India and quite a few other important spots. In addition he points out weak points in each economy (example: lack of a bond market), so the book gives a well rounded picture.

This book would be great for anyone who just wants to get a better picture of Asia. The only down side is that as it was published in 1995, it has quite a few predictions about what things will be like in five years - shame on the publisher for not doing an updated edition.

Ten years after its publication, this book is still full of life and rich in anecdotes. Here is a particular one:

"A tale told by a Samsung executive gives a flavor of the regimental but messianic nature of South Korea's drive to industrialize. In the early 1980s the South was still a military dictatorship (though with a new dictator, since Park had been assassinated in 1979) and still on high alert against the possibility of a sudden attack from the North. Seoul, which is only twenty-five miles from the border with the North, had a strict curfew after midnight. This was a considerable irritation to the capital's businessmen, who are great carousers, and many of whom ended up having to sleep it off in a jail cell for breaking the curfew. Once, the Samsung executive was being driven home post-curfew after a jolly evening with some colleagues and an American buyer. Stopped at a roadblock, the executive pointed to the American and whispered to the military policeman, "Export promotion." The policeman snapped to attention, saluted smartly, and said, `You are on the nation's business. Proceed.'"

"Asia makes you greedy," states the author in the introduction. In his case, it also makes him eager to challenge established ideas and offer provocative thinking on a range of economic and social issues. Rohwer's main contention is that European countries exhibit bloated social protection systems that they cannot jettison because these systems are deeply entrenched in vested interest politics, whereas Asia has eschewed the welfare state and maintained a ruthless model that leaves it "without the West's excruciating problem of dismantling an unaffordable welfare state that many voters nonetheless depend on."

Although Rohwer quotes extensively from Lee Kuan Yew, the philosopher-king from Singapore, his favorite place in Asia tends to be not Singapore but Hong Kong, at least before it was reunified with mainland China. A journalist turned banker, Rohwer followed Milton Friedman's advice that "if you want to see capitalism at work, go to Hong Kong" and became enamoured with this British colony, which in his view offers the best of democracy without its shortcomings. But of course he is conscious of the transient nature of this city-state and quite pessimistic about its post-1997 prospects.

Neither democracy nor authoritarianism find favor with him, as he quotes an eighteenth-century Scottish philosopher stating the following: "A democracy cannot exist as a permanent form of government. It can only exist until a majority of voters discover that they can vote themselves largesse out of the public treasury." According to Rowher, greed, rather than welfare, provides the social foundation for success.

Mr Rohwer is a HK based journalist for London's newsweekly, The Economist, spending more than 5 years in HK and 12 years at the magazine before writing his first book which was a decade in the making. It is an ambitious book, as he presents and interprets the rise of Asian countries since WWII, with center stage on PRChina's development, yet including the 5 Tigers (Japan, S Korea, Taiwan, Malaysia, and Singapore), Indochina, and the India and Pakistani subcontinent. Asia is illustrated on a two page map and PRChina with a separate map, along with almost 20 tables, graphs, and charts. He has a comprehensive 10-page bibliography and a 16-page index. Rohwer is an uncommonly forthright author, writes without the British colloquialism and arrogance of journalists based in the UK as he was educated in the States at UC Berkeley and a Harvard Law JD.

In a broad-brush introduction in the first three chapters he compares and contrasts the Asian to Western economies. Each Asian country (1995) is presented as metrics in tables (p38-39) so that the reader can quickly compare and contrast key measurements such as GNP, GD Savings, GD Investment, Gov't spending, demographics, imports and exports. Most metrics were based on World Bank reports. He also presents the population growth to year 2015 (p43) of Asian cities and how they compare around the world. Most importantly he showed, from a historical perspective, the political and economic structures in Taiwan and S Korea to foster growth after the devastation of WW2 and Korean conflict.

Then he concentrated on the Greater China community in the next four chapters (80 pgs) which I consider the meat of his book. This includes PRChina (Communist), Taiwan (Western), and OEChinese (ASEAN). In the late 80s and early 90s, the OEChinese invested in PRChina, more than from Japan and US (p108). I was surprised to find out how PRChina become the investor into HK and Taiwan so that it can rev-up its own economy (p133).

Rohwer contends that the Achilles'heel of PRChina is timely development of the infrastructure in rural and cities; such as roads, electrical grid, communications, sewage, fewer barriers to trading (freight forwarding), and rule of law (p140). Rapid development of this societal infrastructure is the key impediments for the Greater China to become the #2 dominant economy in the world by 2015.

The core information regarding the OEChinese and how they fit into the Greater China community is in Chap 11 The Business Roster: The Hua Ch'iao. In over 14 pages, Rowher explains the intricacies network of self-capitalization and family enterprise formation. On this basis, he shows how OEChinese dominated the businesses in Indonesia, Thailand, Vietnam, and the Philippines. Furthermore, he goes on to show that the Greater China generates business value that is currently larger than the US and is comparable with Japan plus Western Europe. This occurred because Chinese were not consumption-oriented (large savers), taxes for social infrastructure (welfare) were non-existent, and a finely tuned underground financial network for them to quickly make business decisions. Sort of a self-imposed exile in lieu of starvation or political persecution, OEChinese became the gypsy Jews of the East (p231), but later made good. As a class, Rohwer estimates that there are more than 50 million OEChinese (a sixth of US population) throughout the world. Rohwer further remarks that these OEChinese often keep their enterprises secret and private to the world's scrutiny and out of the media spotlight.

In looking into his crystal ball, Rohwer accurately predicted the 1) Asian crash of 2000 (p18), 2) PRChina economic growth in the next decade 6-7% year (p166) compared to 7-8% actual and 3) American companies have the best position to benefit with investment and trade with PRChina (p214).

Less well, he didn't predict 1) PRChina's entry in WTO on Sept 2001 (p98), 2) the Three Gorges Dam on the Yangtze river startup 5 years ahead of his estimate of 2010 (p263), and 3) the millennium deluge of American private financing of projects in PRChina (p277).

Most people acknowledge that the PRChinese SEZs have been a huge success for economic growth with private enterprise with Chinese characteristics primarily funded by OEChinese. From the tremendous growth of Xaimen with labor intensive electronics industry and Shenzhen with a broad based labor intensive industry, Deng Xiaoping's experiment in Chinese capitalism was a runaway success. This success begat the TVE (community owned collectives which had free reign from Beijing) and it had spectacular success with local market-oriented PRChinese agriculture and light industry. With over 20 million TVEs formed since the 1990s (p130), PRChina became largely self-sufficient in food production and producing quality items to support the industrial and rural infrastructure. These successes spurred on PRChina self-opening to the world for foreign trade, investment, and market-driven enterprises that is on-going today. There are many SEZs, in every province, provincial capitals, major cities and towns, interior, Yangtze river, coastal, and islands (p136).

Note that these efforts for opening the PRC for trade and investment was due to PRChina doing it on its own terms. It started after Nixon visited China in 1972 and culminated with Deng's visit to see Carter in 1979. The resulting TV media play in PRChina galvanized and electrified the PRChinese populace (p132) for a market-driven economy. No more colonization.

The most significant SEZs are:

Xiamen across Taiwan Straits - Central East coast, electronics manufacturing
Shenzhen near Hong Kong - South Coast, light manufacturing
Pudong in Shanghai-Central East coast of China, future financial center of PRChina
Zhongguancun in Beijing - Capital, High-Tech Silicon Valley of China

Some authors can ferret the facts, evaluate economic activity at the grassroots, micro, and macro level, and use this knowledge to predict the future, such as Rohwer. Other authors grab the headlines with glittering generalities and post facts from a narrow slice of time, and try to make sweepingly broad generalizations that can't help from being non-sophomoric, as John Neisbitt's Megatrends Asia and Joe Studwell's China Dream.

"Anybody arrogant enough to write a book generalizing about the fate of three fifths of mankind living in the world's most ancient and complex and now fastest changing civilizations deserves all the criticism that I will no probably get" (from the Acknowledgments, pg. 351)

The author's humility is endearing, but I am compelled to share my enthusiasm for this book in glowing terms.

Asia Rising is far and away the best economics book I have ever read. The author is a journalist, and he quite happily combines anecdotes and quantitative analysis to present a compelling story of wealth creation.

Although the book covers a lot of ground, the theme of the virtue of free markets and the mischief of big government recurs frequently. The author points out the paradox (to Westerners) of how authoritarian regimes in Asia have in a single generation lifted hundreds of millions of Asians out of poverty, while more democratic and socialist governments have created a legacy of depravation. The comparisons between China and India are the most poignant. A few quotes:

"How can it possibly have happened that...China's authoritarian government has delivered far greater benefits to the average Chinese than India's fairly stable and democratically elected governments have delivered to the average Indian? The short answer is ...China's government has followed policies which, because they rely on...markets to set prices and allocate resources, spread the benefits of economic growth pretty widely through society. In India, by contrast, ...rulers have acted almost entirely at the behest of...the better off." (pg. 173)

"After 1978, China grew by letting competition flourish; before 1991, India tried to grow by eliminating as much of it as possible because it was "wasteful"." (pg. 177)

"For almost thirty years Taiwan and Sourth Korea were run by rather nasty military dicatatorships. Yet there, and in Hong Kong and Singapore too, the authoritarian approach was not only more efficient economically than democratic decision making; it proved to be more egalitarian as well-for the simple reason that it is the rare lobby in a democracy that wins government benfits for the poor rather than the previileged." (pg. 326).

The book is such a page turner, I was dreading finishing it. It is a tour-de-force, with thought provoking content dealing with politics, culture, policy, family life, and many other topics. I found myself pausing frequently to reflect on my own life, my values, and the society I live in. In this sense "Asia Rising" is a great book, not just a great economics book.

First, a bit of bad news: Rohwer died in a boating accident in France in Sept, 2001. So there won't be a second edition to this or any of his other books.

Rohwer (Berkeley MA in Economics, Harvard JD), who was an investment banker with CSFB in Hong Kong, brought a unique set of qualifications to his research. Some people criticized Rohwer for failing to predict the Asian economic crisis in 1998. (One book has the title: "Asia Falling".) But he did, on page 18: "My guess in that, around 2000, Asia's economic growth will suddenly slow down." This book was first published in 1995, so he saw it coming - even though his timing wasn't perfect. The fact that he made such a prediction, contrary to the tone and theme of his own book, is suggestive. Rohwer was prophetic.

Rohwer's sequel: "Remade in America" is just as good. Writing at the height of America's boom, he saw America's slowdown coming, and went on to suggest continuing strength in China's growth. Nothing has happened so far to contradict anything Rohwer wrote. At $6 trillion China is, according to the CIA World Factbook, the world's second largest economy and 13% of the world's total (Gross World Product: $47 in PPP), an economic giant which is expanding much faster than any major economy in the world - including India's. China is anything but "a modest country at best." (Bill Emmott)

Other books I also recommend include "Thunder from the East" by Nicholas Kristof & Sheryl WuDunn. This couple won the Pulitzer Prize for the NY Times for their China reporting, and their CVs are sterling. "The Rise of China" by William Overholt (Harvard BA, Yale PhD), a former banker at Bankers Trust in Hong Kong, is slightly dated, but shows the brillant judgment of the author. "China's Economic Transformation" by Professor Gregory Chow, Princeton University's former chief of econometrics, brings Chow's specialist quantitative skills to bear on an authoritative analysis of China's economy. All these authors would no doubt support Rohwer's findings and applaud his outstanding research. I myself can't praise Rohwer enough.

Jim Rohwer's Asia Rising is unquestionably the best book to come out and explain the Asian growth that has propelled Asia to the centerstage of the global economy. While some people may now look at the book's title and say, hey, how wrong he has been in his prediction -- they will end up judging the book by the cover, literally. In fact, if one throws away the first 20 pages of his book, his book indeed cautions and seriously warns of the problems in Asia and its potential consequences -- just as it analyses and lauds the power of the Asian growth with journalist's skill for clarity and an economists eye for numerical detail. I read this book twice and still use it as a reference guide in my work as a financial journalist based in Taipei, a country least affected by the Asian crisis. Mr.Rohwer, formerly Asia expert at the economist who now works for Fortune, has also been brilliantly following and writing on Asia in the aftermath of the great Asian implosion. His recent article in Fortune entitled "Why Taiwan may be next to fall" made full sense even if the officials here rejected it with perverse pretention. Indeed, Taiwan has most of the problems that has existed in other Asian countries, but the only thing that saved it from the contagion like China is due to their closed financial systems. But the global deflation and slowdown in trade is now taking a toll on the growth of the export-driven Taiwan. This will continue to pose major problems in 1999. As corporate earnings deteriorate, banks are now seeing their bad loan ratios double just as their spreads are being squeezed by falling interest rates. And banks are making little money now but are asked to set aside massive amount of loan loss provisions. This phenonmenon is now leading to a credit crunch in the banking system which is making it very difficult for companies to get money to cope with this severe economic downturn. The system is now in a dangerous catch-22 situation. As Mr.Rohwer pointed out financial crises do not have to a direct result of a cross-country contagion, but locally-developed ones can be quite as lethal. And this will not come into being when things are good overseas and companies can ride on the export boom, but, to quote Warren Buffet, bare bottoms will surface only when the water level drops in a swimming pool full of naked swimmers. TN

I will reiterate the enthusiasm of the other reviewers. Asia Rising really is a must-read type book for anyone with even a passing interest in world affairs. It gives a clear and compelling look at the economic revolution going on in some of the most highly populated countries in the world. These are events which are already affecting our day-to-day lives in very material ways, and there is no turning back. What makes this book so valuable and intriguing is that it deals much more with documentation and summary than it does with abstraction and/or theory. Finally unlike most writters who attempt to delve into the dismal science, the author has a clear, concise and down right enjoyable writing style

What threads connect up Asia's Growth, past and future? And how can the rest of the world learn from these great wealth-creating societies? What will be the cost to Western nations whose leaders are too proud to learn from Asia's dynamic economic processes and infrastructures? These sorts of future history questions have absorbed journalists who have written for The Economist for decades. Certainly since my father, Norman Macrae, surveyed Japan's extraordinary growth prosepects in the 1960s and probably earlier.

Whilst my Dad earned some praise, including Japan's Order of the Rising Sun, for his constantly bullish explanations of Asia's future rights to lead the Triad of contintents which shape world class business, education and the human lot, we'd gladly rate Jim Rohwer's Asia Rising as the modern single-source introduction to why Asia in general and China in particular are set fair to be the world's 21st century centre of economic gravity. Whether you agree or disagree; whether you foresee opportunities or risks which could make or break Asia's course; we invite all who have passionate or expert opinions about Asia to join our free e-mail summit on Asia Growing. This global discussion is designed so that busy people can browse and input as time permits and topic relevance matters. So do please e-mail me if you would like to join our bullish discussion on Asia's Growing future.
Chris Macrae, e-mail wcbn007@easynet.co.uk