Country risk Sep 2003: Measured enthusiasm on east Asian boom

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IN JULY AND August, trackers of portfolio investors started reporting rising fund flows into east Asian equities as portfolio managers placed their bets on where best to reap the benefits of the global economic recovery. Economists and country risk analysts support their choice - up to a point.

"The fastest-growing economies in 2002 and likely this year are the east Asian economies," says Linda Yueh, who lectures in economics at the London School of Economics and Oxford University. "Looking in terms of world trade, more than 10% of growth is attributed to transition economies, including China," she says. Even taking into account the Sars epidemic, the rate of growth in the region is expected to be about 5% in 2003, with China (49) leading the way.

China has surpassed the UK (6) as the world's fifth-largest exporter and it is the sixth-largest economy. It has averaged growth rates of 9% over the past 25 years of market-oriented reforms. In terms of confidence reflected through foreign direct investment, China overtook the US last year as the largest recipient of inward capital flows.