This month’s “Regional Focus“ takes a look at Asia, highlighting China, Malaysia and South Korea. In 2007 China notched up growth of 11.4 %, the highest since 1994. In China, as well as in Malaysia and South Korea, private consumption is playing an increasingly important role, whereas exports will fade as a driver of growth in 2008.

Our “Special Focus“ examines China’s long-term economic outlook. Economic momentum will gradually taper off in the next 14 years, nonetheless by 2022 China will become the third largest economic region in the world, almost pulling level with the euro area. This development will be accompanied by a host of structural changes.

And, of course, you will also find our regular reports on the USA, the euro area, Germany and Japan.

Enjoy!

The outlook for the first half of 2008 has clouded over further. Although the stimulus package should help the economy find its footing again in the second half of the year, average growth for 2008 is likely to come in at only 1.5 %.

Although the ECB is resisting a rate cut given the current highlevel of inflation, we think that a loosening of monetary policy will be unavoidable due to the economic risks.

Positive economic indicators have clearly predominated in recent weeks. There is growing evidence that the German economy got off to a better start in 2008 than initially assumed. Even private consumption started to show signs of a modest pickup in the first quarter.

Economic activity in the emerging markets is still purring: Russia’s economy expanded by more than 8 % in 2007, reminiscent of far eastern or even Chinese expansion levels. India is notching up similarly strong economic momentum, and in Latin America there have not been any signs so far of the frequently prophesied economic downturn.

This article examines China’s long-term economic outlook. We analyze the factors driving Chinese economic growth. We reach the conclusion that economic momentum will gradually lose steam over the coming 14 years. For the period 2009-2012 our base scenario foresees average annual GDP expansion of 9 %, for 2013-2022 by contrast 7 %. Nonetheless, by 2022 China will have become the world’s third largest economic region, almost pulling level with the euro area. This development will be accompanied by many structural changes: domestic demand, led by private consumption, will see above-average growth, where as the importance of exports as the main driver of the economy will fade.