It will also create problems with Japan, where nationalist sentiment in the figure of Tokyo Governor Shintaro Ishihara is rearing its head. A recession in the United States will not only weaken Asian economies but also create significant opportunities for trade friction between the United States and a large portion of Asia. Viewed on its own terms, Asia remains susceptible to a relapse of the economic collapse of 1997. Its export-based economies are still dependent on U.S. consumption and need further foreign investment. While the Asian economies are no longer in free fall, they generally have not made the structural adjustments necessary to prevent another economic slide.
Banking systems are still a mess and companies are far too bloated with middle management.
Homegrown solutions like Malaysian-style restrictions to control capital flight still don't make up for decreased investment. The self- proclaimed recovery is little more than a cyclical uptick in a downward trend. Some countries, however, will be better off than others. Out of all the Asian economies, South Korea, Singapore and perhaps Thailand are somewhat prepared to deal with another downturn. Singapore at least understands the region's tenuous economic position and is doing what it can to insulate itself.