>CHART OF THE WEEK (HSBC)

How big is Asia?

Let’s be honest, it’s the only reason we’re all getting out of bed each morning. No matter the extent of credit crunching in other parts of the world, Asia is still around and, if things turn out right, it should one day be the largest market by far. Over a billion Chinese consumers – enough said. But, how big is the region, really? Papers are full of references these days. Take car sales, for example. Year-to-date, more cars have been sold in China than in the United States. Not bad, although US shoppers are taking a little time out for the moment, and the numbers may reverse again when they return. Elsewhere, turnover on the Chinese stock market is now higher than in New York, and even turnover in Asia ex Japan and China is roughly equal to that in the US; that’s a watershed, arguably, although the numbers are flattered in each direction by both overly bouncy Asian investors and their still despondent US counterparts.

These are all snippets. What about the numbers that matter: consumption and investment? We keep reading various estimates and forecasts, so we thought it would be worthwhile to settle the matter once and for all. Here’s what we did: we took nominal expenditure in USD dollar terms for 2008, converted at market exchange rates. For the projections, we used long-run forecasts for real growth. Using nominal growth rates introduces too many distortions as inflation varies a lot across countries. So we deem our approach defensible. What’s the bottom line? Asia isn’t going to carry the world. But incremental consumption growth is already helping to offset the weakness in the West. Moreover, in terms of investment spending, Asia rules the day. Those who benefit are commodity exporters and producers of investment machinery. Those who want to tap into an Asian consumer market have growth to look forward to, but scale can only be achieved by exporting to the
West. Asia is getting bigger, time to get out of bed.

To see full report: CHART OF THE WEEK