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The Mayans were wrong. The world won’t end in 2012, but at times it may feel as if it’s about to. Such is Asia’s lot as Europe’s debt debacle and the U.S.’s political paralysis fuse, presenting challenges for leaders from Beijing to Jakarta.
In a less chaotic time, this might have been Asia’s big moment. News this week that Japan and China will promote direct trading of yen and yuan without using dollars is a case in point. An eastward shift of power and capital would seem to be a given as Brussels and Washington turn inward. Yet a worsening global environment will interrupt Asia’s path to economic dominance.
Here are eight risks that may get in Asia’s way:
No. 1. Recoupling. Asia steered around the U.S. meltdown in 2008 with remarkable agility. Doing that will be harder in the 12 months ahead as all of the world’s major growth engines stall or go into reverse. Default risks in Europe will increase, the U.S.’s funk will persist in an election year, Japan’s malaise will deepen and China will hit a soft patch. With deft fiscal and monetary maneuvering, Asia grew impressively in the three- plus years since Lehman Brothers Holdings Inc. imploded. A repeat performance is unlikely.
No. 3. Occupy Wukan. It’s getting harder for China to keep its 1.3 billion people from hearing about events in a coastal village in Guangdong province. There, thousands of people fed up with land seizures took to the streets and forced out Communist Party officials. This Occupy Wall Street dynamic is a startling contrast to the usual success China has in quashing any hint of public discord. As the New York Times points out, there are at least 625,000 potential Wukans in China. The 12 months ahead will be busy for China’s thought police.
No. 8. China’s Bust. It’s a make-or-break year for China’s efforts to defy the economic laws of gravity. A bad-debt hangover from the huge stimulus of recent years is a distinct possibility. Markedly slower growth would be a nightmare for a Communist Party obsessed with social stability. It also would be a big blow to a country such as Australia, which is more vulnerable to a Chinese slump than officials in Canberra admit.
Should the second-biggest economy join the U.S., Europe and Japan in the slow-growth club, Asia would find itself in treacherous territory. That wouldn’t be the end of the world as the Mayans anticipated for 2012, but it would be different than the one we’ve come to know.