A group of economists working for the Pacific Economic Cooperation Council forecast in June that East Asia, minus Japan, would grow by 4.9 percent in 2000 before easing to 4.7 percent in 2001. But it is equally possible in Latin America or Africa, because we haven't yet resolved the problem of the global financial architecture,'' he said. Mr. Tsang said that the international community had failed to develop a global system for monitoring flows of ''hot capital'' - the huge sums of investment money whose sudden withdrawal from East Asia's currency and stock markets in the second half of 1997, starting in Thailand, caused a financial stampede from the region. Mr. Tsang, one of East Asia's most experienced economic managers, said that higher interest rates in the United States, where the Federal Reserve Board has been ratcheting them up in an effort to slow persistently strong economic growth, could eventually leave their mark, causing a slowdown in Asia, too. He said he was also worried about Japan's sputtering recovery from a decade-long slowdown, and its slow return as a regional investor.
Japan is the world's second largest economy, after the United States.
The United States is East Asia's largest trading partner. It absorbs some 20 percent of the region's exports, while Japan takes in another 13 percent. Along with the European Union, the United States and Japan have been the leading sources of investment in East Asia, especially in the manufacturing plants that helped the region become an export powerhouse. Mr. Tsang said. In all three countries, a combination of political faction-fighting, recent or looming elections, and resistance from local companies and other powerful vested interests is slowing or halting change in critical areas.