China and India Will Dominate Headlines from Asia

2013 will be marked by weak Asian growth and a final recognition that the region must address its large trade imbalances and move its economy away from exports. But that won't be the most exciting change in Asia.

China on the March

China is increasingly going to challenge the U.S. and its allies across Asia. The U.S.'s pivot to Asia notwithstanding, China will grow in military confidence in 2013. China is already testing its first aircraft carrier, it's been involved in numerous spats with Vietnam and Philippines in the South China Sea and the Senkaku/Diaoyu islands remain a flash point with Japan.

Politicians will need a rallying cause to win support at a time when growth is slowing and questions about the wealth accumulated by families of some Chinese leaders is growing. So expect more power projection and more muscle flexing from China's military.

Major Indian Bankruptcy

India could experience a major corporate bankruptcy that could hurt investor confidence. Many companies have taken out foreign currency loans and are feeling the heat as the rupee weakens. At the same time, growth is slowing,some industries are locked in brutal competition (look at aviation and telecom), and input prices are rising. A downgrade for India's sovereign rating looks likely, and that could have a knock-on effect, raising funding costs for corporations further and pushing weak ones over the edge.

Property Bubble Deflates

Property prices in Asia's major markets, such as Singapore and Hong Kong, have gone from strength to strength. Helped by rock-bottom interest rates and lots of investment demand, policymakers are warning the risks could exceed the bubble days of 1997. Hong Kong's property prices, for example, have risen 50 percent since 2009. Even parking spaces are going for big money, with single parking slots being sold for $160,000.

But history will finally catch up with some of these markets in 2013. Prices will fall, and transaction volumes will tumble. Yet it might not be a major bust because of recent government actions to cool the market.


Looking ahead to 2014



Predictions 2013 Slideshows