Reversal of fortune.

The article focuses on economic activity in Asia, as well as the saving surplus in East and South-East Asia. Emerging economies are piling up current-account surpluses. The role of oil prices in today's global imbalances is often overlooked, but surplus saving in oil-exporting countries, as a group, is now the biggest counterpart to America's deficit. A sudden windfall of wealth from a "terms-of-trade shock" initially tends to be saved not spent, and national saving rates in oil-exporting countries have recently shot up. Sun-Bae Kim of Goldman Sachs, an investment bank, points out that investment rates in emerging Asia as a whole, including China, look much healthier than in the region outside China. But emerging Asia's biggest investment weakness is outside the export sector. The mystery is that rapid export growth has not translated into higher domestic-sector investment, especially as real interest rates in the region have been low or even negative for much of the past three years. Most analysts blame Asia's currency policies. Not everyone agrees. Jonathan Anderson, an economist at UBS, maintains that Asia's central banks are holding their currencies down not in order to boost exports at the expense of domestic consumption, but rather because domestic demand is so weak. Nonetheless, there are some tentative signs of an upturn in domestic demand. The region's stockmarkets have risen by $1.6 trillion since 2001, equivalent to one–third of nominal GDP. Residential property prices have picked up. Several economies in the region have already seen their current-account surpluses shrink. Thailand's current account even moved into deficit this year. As these countries are oil importers, high oil prices will also reduce the region's surpluses. Emerging Asia's willingness to send its savings abroad may have peaked. But given the region's recent history, the odds are that the adjustment will be gradual.