In September 2008, the global financial crisis hit Asia like a tidal wave, flooding in from the U.S. and Europe. Within weeks, Asian GDP growth rates began to tumble: China's annual growth rate dropped from 13 percent in 2007 to about 9 percent in 2008, India's slipped from 9 percent to below 6 percent, and Singapore's plunged from 8 percent to less than 4 percent. Underlying these stark statistics were significant declines in exports. In March 2008, China and India had boasted year-over-year export growth rates of more than 30 percent; nine months later, both were well into negative territory. Foreign direct investment in these countries, and in Korea, Japan, and the nations of Southeast Asia, fell significantly as well.
But by September 2009, it was clear that China, India, and other emerging Asian economies would be the first part of the global economy to rebound. In the second quarter of 2009, China's GDP was up 7.9 percent compared to the same quarter in 2008; India's growth rates began to rise over the same period. This all came as a surprise to many observers, who had overestimated the importance of exports to the largest Asian economies and otherwise underestimated Asia's healthy fundamentals. As
it turned out, domestic banking systems in China and India were relatively unaffected by the subprime and securitization crisis, and rapid growth in domestic demand, spurred by government stimulus, compensated for at least some of the drag caused by declining exports. Forecasts call for even better results in 2010. In addition, economic prospects are either stable or rebounding in Pacific Rim nations. In the second quarter of 2009, according to a survey in the Economist, Singapore, China, Korea, Japan, and Australia showed quarter-on-quarter annualized GDP growth of 21 percent, 15 percent, 10 percent, 0.9 percent, and 0.6 percent, respectively. The accuracy of specific numbers may be open to debate, but the general direction is undeniable.