Asia toying with US? Not yet

As the industrialised world slides toward possible recession, could still-booming developing nations come to its aid? Can China save America?

Hardly. Economies such as China's and India's are growing fast, but they are still much too small to pull giants such as the US or Europe out of a swamp, say most economists.

For the first time, though, developing countries - now accounting for more than half of global economic growth - could probably ride out the storm afflicting richer nations.

"China is not going to save the world," says Jon-athan Anderson, chief economist at UBS Bank in Hong Kong. "But it is part of a very different picture. The US, Europe, and Japan will go in one direction, and the developing world will carry on."

And if the emerging markets do keep growing during a developed-world slump, economists note, they could at least cushion the blow for others. They will continue to import the industrial machinery that US and other advanced nations make and will still have an appetite for raw materials such as oil and minerals from the Middle East, Africa, and Latin America.

Since China, Russia, India, and Brazil, the main emerging markets, account for only about $6 trillion of gross domestic product (GDP) - compared with $32 trillion in the US, Europe, and Japan - the developing countries' continued growth can only "cushion the US decline in a modest way", says Arthur Kroeber, head of the Dragonomics economic consultancy in Beijing.

"The strength of emerging economies is in some ways self-sustaining," says Ed Yardeni, president of Yardeni Research in Great Neck, New York. But "a recession in US could ... interact with the credit crisis to become something really awful."

One sign of worry about global financial "contagion" is the performance of stock prices: Shares in banks outside the US have fared worse than US banks themselves over the past three months, and stock markets in emerging nations, Europe, and Japan have all fallen even harder than Wall Street.

When they met in Tokyo last weekend, however, fin-ance ministers from the world's largest economies, the Group of Seven, said that "emerging-market economies are forecast to continue robust, if slower, growth."

Winning edge

Developing countries have the edge for a couple of reasons. They are playing catch-up to richer nations, and many of them have benefited from boom times for commodities such as oil. In the process, they have come into their own as global economic forces.

From Bahrain to Brazil, people are busy building bridges, information networks, even whole cities. They are selling goods and services to one another, not just to Americans. And they are buying more products than ever from advanced nations - a boon to now-struggling economies like the US.

The biggest implications are for the developing countries themselves. China and India are relatively immune to trade shocks. And with Brazil and Russia exporting commodities whose prices Chinese demand is expected to keep high, "the emerging market bloc suddenly starts to look much stronger going into a slowdown," says Anderson.

"That's unusual," he adds. In past recessions, he recalls, "trouble brewing in the big industrialised economies spelled trouble in the developing world. This time, we are not looking at that."